Oil prices climb as Saudi capacity cushions impact

Saudi Arabia has blamed Iran for the weekend attacks on its oil infrastructure. (Shutterstock)
Updated 21 September 2019

Oil prices climb as Saudi capacity cushions impact

  • Kingdom pledges return to capacity by end of November as Kuwait strengthens security for oil sector

LONDON: Oil prices gained on Thursday, supported by supply risks as the market assesses the fallout from last weekend’s drone attacks on Saudi oil
infrastructure.

Brent crude futures gained $1.78 to $63.80 a barrel, while US West Texas Intermediate crude was up $1.28 at $58.40 a barrel.

The attacks knocked out around half of Saudi Arabia’s crude production and severely limited the country’s spare capacity, a cushion for oil markets in any unplanned outage.

“Global available spare capacity is extremely low at present following the weekend attacks, leaving little room for additional outages, which tends to be price supportive,” UBS oil analyst Giovanni Staunovo said.

Earlier this week Saudi Arabia set out a timeline for a resumption of full operations, saying it had restored supplies to customers at levels prior to the attacks by drawing from its oil inventories.

HIGHLIGHTS

• US to impose more sanctions on Iran.

• Cushing stocks at lowest since October, 2018.

• Global excess capacity at low level.

The Kingdom said it would restore its lost production by the end of this month, and bring its output capacity back to 12 million barrels per day by the end of November.

“These plans suggest Saudi Arabia will have no spare capacity for at least the next two and a half months,” consultancy Energy Aspects said.

Saudi Arabia, the world’s leading oil exporter, has said the crippling attack on its oil sites was “unquestionably sponsored” by Iran.

US President Donald Trump said there were many options short of war with Iran and added that he had ordered the US Treasury to “substantially increase sanctions” on Tehran. Iran has denied involvement in the strikes.

Iran warned President Trump against being dragged into all-out war in the Middle East.

US Secretary of State Mike Pompeo has described the weekend strike as an act of war and has been discussing possible retaliation with Saudi Arabia and other Gulf allies.

Kuwait’s oil sector has raised its security to the highest level as a precaution, a Kuwaiti official said.

Separately, weekly data from the Energy Information Administration on US oil inventories provided a mixed snapshot.

Stockpiles of crude in the US the world’s largest oil producer, rose by 1.1 million barrels last week against analysts’ expectations for a drop of 2.5 million barrels.

However, stocks at Cushing, Oklahoma, the delivery point for benchmark futures, fell to their lowest since October 2018.


Dubai carrier Emirates doubts Boeing 777x aircraft delivery in 2020

Updated 14 October 2019

Dubai carrier Emirates doubts Boeing 777x aircraft delivery in 2020

  • Emirates is a launch customer of the world’s biggest twin engined jet
  • The US planemaker suspended load testing of the plane when media reports said a cargo door failed a ground stress test

DUBAI: Emirates doubts it will receive any of the 115 Boeing 777-9s it has ordered next year, its president said on Monday, as the US planemaker grapples with challenges in building the jet.
Emirates, a launch customer of the world’s biggest twin engined jet, was to receive its first 777-9 in 2020 but the manufacturer has suspended load testing of the plane.
“... By the end of next year we were to have eight of them. Now it doesn’t look like we will have any,” Tim Clark said at a conference in Dubai.
Boeing suspended load testing of the new widebody in September when media reports said a cargo door failed a ground stress test. There have also been issues with General Electric Co’s new GE9X turbine engine that will power the jet.
Boeing has said it expects to hold the initial flight test in 2020 and is aiming for the 777X to enter commercial service in the same year.
Clark said he had told Boeing he insists on a 13- to 16-month test period for the new jet.
Emirates ordered 150 777X jets, including 777-8 variants, in 2013. It later placed a preliminary order for 40 Boeing 787 Dreamliner jets in 2017, which Clark said he still saw a place for in the airline’s fleet plans.
Boeing has also been unable to deliver any of its 737 MAX aircraft since the single-aisle plane was grounded worldwide in March after two fatal crashes in Indonesia and Ethiopia killed 346 people.
Clark said in September Emirates would not take new Airbus and Boeing planes unless they were truly ready, and said that engine makers Rolls Royce and GE must improve their reliability.
Aircraft manufacturers should not over promise on new aircraft capability, he said on Monday.
Emirates has also signed deals for 40 Airbus A330-900s and 30 A350-900s.