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Biggest Oil Rally in 3 Decades; What Next?

CommoditiesSep 16, 2019 03:14PM ET
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© Reuters.

Investing.com – The oil market had its biggest rally in nearly 30 years Monday as crude prices rocketed more than14% after Saudi Arabia’s oil facilities were attacked.

West Texas Intermediate, the U.S. benchmark blend for crude, settled at $62.9, up $8.05 or 14.8%. Since the start of Monday’s trading in Asia, WTI had reached as high as $63.47, for an intraday gain of 15%.

Brent crude, the international benchmark blend, settled at $69.02, up $8.80, or nearly 14.6%. It topped out at $64.83 earlier in the session, a 19% gain.

These were the biggest intraday gains since the 1991 Gulf War that sent crude spiking after the U.S. entered into battle with Iraq to free Kuwait from Saddam Hussein’s invasion.

"The impact and the next course of action will depend on the duration of the outage,” said Vima Jayabalan, research director at energy consultancy Wood Mackenzie.

Mackenzie added that, “Saudi Arabia has enough reserves to cover the shortfall over the next week, but if the outage extends, then filling the gap with the right type of crude quality could be a challenge. Moreover, OPEC+ output cut predominantly consists of medium and heavy sour crudes.”

Saturday’s drone-based attacks on Saudi Arabia’s main oil processing complex, Abqaiq, and the neighboring Khurais oil field halved the kingdom’s crude output by half and daily world supply by 5%.

The Wall Street Journal initially quoted unidentified Saudi officials as saying that the Saudis expect to have a third of output, or 2 million barrels per day, restored by Monday and to rebalance supply in the coming days. But Reuters cited two sources at Saudi state oil company Aramco as saying that a full return to normal production volumes "may take months."

Adding to the traders’ dilemma was how Saudi Arabia and its main ally, the United States, planned to respond to the attacks. Yemen-based Houthi rebels claimed responsibility for the raids, but U.S. officials overwhelmingly accused Iran.

President Donald Trump, who has said he’s open to holding talks with Tehran to resolve his own country’s sanctions conflict with the Islamic Republic, declined to name Iran as a suspect, though he said the U.S. was “locked and loaded” to respond.

Monday’s rally came off market highs after Trump said he had instructed the release of emergency crude supplies from the U.S. Strategic Petroleum Reserve. It is not known how much of SPR crude will be required to stabilize global supplies in the aftermath of the Saudi attacks. The affected Abqaiq processing complex and Khurais oil field in the kingdom accounted for nearly 6 million barrels per day of production.

The other thing holding the crude rally in check was the slide on Wall Street, as airline stocks tumbled on worries about pricier jet fuel, even as shares of oil companies surged.

Biggest Oil Rally in 3 Decades; What Next?
 

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Don John
Don John Sep 17, 2019 1:18AM ET
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When saudi needs money thry pump oil prices themselves lol
Spencer Dardon
GreenGreta Sep 16, 2019 6:28PM ET
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Stay out for a few days, first day no green short
Hank Williams
Hank Williams Sep 16, 2019 6:14PM ET
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Based on what they showed the fires are pretty large. As many fires as they had and the size it will be months and over a year before everything is back.
Megaa tyger
Megaa tyger Sep 16, 2019 5:40PM ET
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@Harry I bought some PUTS of Oct @ 56$
Stacey Beam
Stacey Beam Sep 16, 2019 4:56PM ET
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Oil may continue to rally until more concrete information is available. Right now it ranges from mostly fixed to heavy longer term damage. We will find out after the price drop.
Yellow Drill
Yellow Drill Sep 16, 2019 4:52PM ET
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Flood the market with 100 million barrels...Courtesy of the u.s.a.
Donald D Donald
Donald D Donald Sep 16, 2019 4:35PM ET
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someone should predict gold movement Tuesday.
Adam Br
Adam Br Sep 16, 2019 2:46PM ET
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KEG, PTEN, SDRL, RIG for tge best plays on Riggers.
Jozay Alojos
Jozay Alojos Sep 16, 2019 2:42PM ET
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Planned!!!
Adam Br
Adam Br Sep 16, 2019 2:42PM ET
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Yea, convienent how the they blamed it on some small militant group. That was their own drone to drive the price up to $100 barrell
Adam Br
Adam Br Sep 16, 2019 2:35PM ET
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Please, this was all planned, look at the charts, they had no where to go but up.
Akhil Gaur
Akhil Gaur Sep 16, 2019 2:35PM ET
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Agreed. chances are there. I trade gold and feel same about that too. it goes high by some artificial panic in market and after a couple of days comes back to its bottom as if everything has brought down to normalcy.Banks and governments are market maker. They do all these exercises to keep getting benefitted.
Jitendra Kushvaha
Jitendra Kushvaha Sep 16, 2019 2:33PM ET
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i hope as it is
Benjamin McIntire
Benjamin McIntire Sep 16, 2019 2:30PM ET
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Whats next? Probably the biggest oil selloff in a decade.
Benjamin McIntire
Benjamin McIntire Sep 16, 2019 2:30PM ET
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