Oil falls but prices still elevated after attacks on Saudi facilities

A satellite image shows damage to Saudi Aramco’s Haradh gas facility on September 14, 2019. (Planet Labs Inc./AFP)
Updated 17 September 2019

Oil falls but prices still elevated after attacks on Saudi facilities

  • Attacks on Saudi Arabian crude oil facilities that cut the kingdom’s output in half
  • ‘The question is how long it takes for the supply to get back online’

TOKYO: Oil fell more than 1 percent on Tuesday as the market hung on tenterhooks over the threat of a military response to attacks on Saudi Arabian crude oil facilities that cut the kingdom’s output in half and sent prices soaring by the most in decades.
The Saturday attack heightened uncertainty in a market that had become relatively subdued in recent months due to slowing global growth as the US-China trade war rages. Saudi Arabia is the world’s top oil exporter and has been the supplier of last resort for decades.
Brent crude was down 73 cents, or 1.1 percent, at $68.29 a barrel by 0405 GMT, and West Texas Intermediate was down 87 cents, or 1.4 percent, at $62.03 a barrel.
Prices surged nearly 20 percent in intraday trading on Monday in response to the attacks, the biggest jump in almost 30 years, before closing around 15 percent higher. Equities and other markets were also pressured on Tuesday.
“The question is how long it takes for the supply to get back online,” said Esty Dwek, head of global market strategy at Natixis Investment Managers.
“However, the (geopolitical) risk premium ... which has been basically ignored by markets in favor of growth worries in recent months, is likely to be priced in going forward,” she said.
A gauge of oil-market volatility on Monday rose to the highest level since December of last year, and trading activity showed investors expect higher prices in coming months.
Japan said on Tuesday it would consider a coordinated release of oil reserves if necessary.
US President Donald Trump said on Monday it looked like Iran was behind attacks on the Saudi oil facilities but stressed he did not want to go to war. Tehran has rejected the charges that it was behind the drone strikes.
Relations between the United States and Iran have deteriorated since Trump pulled out of the Iran nuclear accord last year and reimposed sanctions on its oil exports.
Washington also wants to pressure Tehran to end its support of regional proxy forces, including in Yemen where Saudi forces have been fighting Iran-backed Houthis for four years.
“With the US ‘locked and loaded’ awaiting signs from Saudi Arabia that Iran was involved, tensions in the Middle East could get worse before they get better. Under these circumstances, the price of oil could remain elevated for some time yet,” City Index analyst Fiona Cincotta said.
“However, let’s not also forget that the demand picture isn’t great right now, which will dampen the oil price quickly. Most recently China’s industrial production figures disappointed overnight,” Cincotta said.
The attack on state-owned producer Saudi Aramco’s crude-processing facilities at Abqaiq and Khurais cut its output by 5.7 million barrels a day and threw into question its ability to maintain oil exports.
The company has not given a specific timeline for the resumption of full output.


China appeals to Washington for quick end to trade war

Updated 4 min 19 sec ago

China appeals to Washington for quick end to trade war

  • Beijing says it will buy more American goods but has yet to confirm the details
  • Tariff hikes by both sides on billions of dollars of imports have battered factories and farmers

BEIJING: China appealed to Washington for a quick end to their trade war but gave no indication Thursday what additional steps Beijing might want before carrying out what President Donald Trump says is a promise to buy up to $50 billion of American farm goods.
Trump agreed Friday to delay a tariff hike in exchange for Chinese purchases of US exports. Beijing says it will buy more American goods but has yet to confirm the details, leaving companies wondering whether Chinese leaders have other demands including a possible end to punitive US tariffs before that goes ahead.
Negotiators are “striving to reach a consensus on the text of the agreement as soon as possible,” said a Ministry of Commerce spokesman, Gao Feng. “I can’t disclose the specific details.”
US Treasury Secretary Steven Mnuchin told reporters Wednesday that officials were still ironing out details of a preliminary agreement.
Companies welcomed the deal as a small but promising possible step toward breaking a deadlock in the 15-month-old fight over China’s trade surplus and technology ambitions.
Tariff hikes by both sides on billions of dollars of imports have battered factories and farmers, weighing on global economic growth. Trump delayed a tariff due to take effect Tuesday on $250 billion of Chinese goods but another increase on $160 billion of imports still is scheduled for Dec. 15.
Economists warned the truce fails to address more basic complaints about Beijing’s plans for government-led creation of global competitors in robotics and other technologies.
Washington, Europe, Japan and other trading partners say those violate Chinese market-opening commitments and are based on stealing or pressuring companies to hand over know-how.
China wants “economic and trade relations back on the right track at an early date,” Gao said at a weekly news briefing.
Achieving results will “restore market confidence and also is highly significant for stabilizing the global economic situation,” he said.
On Tuesday, a foreign ministry spokesman said China would “further speed up procurement” of American farm exports but gave no scale or time frame.
China has bought 20 million tons of US soybeans and 700,000 tons of pork this year, according to the spokesman, Geng Shuang. China imported about 33 million tons of American soybeans annually before the tariff fight and collapsed to 16.6 million tons last year.