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Oil surges 20% after Saudi attack, softens on stockpile hopes

CommoditiesSep 16, 2019 11:53AM ET
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By Koustav Samanta and Sabina Zawadzki

SINGAPORE/LONDON (Reuters) - Oil prices surged nearly 20% at one point on Monday, with Brent crude posting its biggest intraday gain since the Gulf War in 1991, after an attack on Saudi Arabian oil facilities at the weekend halved the kingdom's production.

Prices came off their peaks after U.S. President Donald Trump authorized the use of his country's emergency stockpile to ensure stable supply.

Brent crude futures, the international benchmark, rose as much as 19.5% to $71.95 per barrel, the biggest intraday jump since Jan. 14, 1991. By 1100 GMT, the contract was at $65.38, up $5.16, or 8.6%.

U.S. West Texas Intermediate (WTI) futures climbed as much as 15.5% to $63.34, the biggest intraday percentage gain since June 22, 1998. The contract was later at $59.36, up $4.51 or 8.22%.

Saudi Arabia is the world's biggest oil exporter.

The attack on state-owned producer Saudi Aramco's crude-processing facilities at Abqaiq and Khurais cut output by 5.7 million barrels per day. The company has not given a timeline for the resumption of full output.

Two sources briefed on Aramco's operations said a full return to normal production volumes "may take months".

"If these outages are lengthy, Saudi Aramco will struggle to hit export specification for its Arab Light and Arab Extra Light streams, and may even be forced to declare force majeure on some of these exports," consultancy Energy Aspects said in a note.

"We expect the IEA and U.S. DOE to also release strategic stocks to fill the gap if the Saudi outage is prolonged," it said, referring to the International Energy Agency and the U.S. Department of Energy.  

Trump said he had approved the release of oil from the U.S. Strategic Petroleum Reserve if needed. He also said the United States was "locked and loaded" for a potential response to the attack.

(Graphic: Global oil prices spike over 10% after attacks on Saudi Arabia oil facilities, https://fingfx.thomsonreuters.com/gfx/ce/7/6460/6442/CrudeSaudiReaction.png)

It was the threat of retaliation and escalation of the tension and conflict in the Middle East, however, that has kept prices high, irrespective of the relief from global stockpiles.

"This justifies a risk premium on the oil price, so prices are initially unlikely to return to the levels at which they were trading before the attacks," said Carsten Fritsch, oil analyst at Commerzbank AG (DE:CBKG) in Frankfurt, Germany.

The attack on plants in the heartland of Saudi Arabia's oil industry, including the world's biggest petroleum-processing facility at Abqaiq, came from the direction of Iran, and cruise missiles may have been used, a U.S. official said.

ASIA EXPOSED, PRODUCTS IN DEMAND

Saudi oil exports will continue as normal this week as the kingdom taps into stocks from its large storage facilities, an industry source briefed on the developments told Reuters.

Major importers of Saudi crude, such as India, China, Japan and South Korea, will be the most vulnerable to the supply disruption.

"India could be most exposed as its reserves are the least. China has a Strategic Petroleum Reserve and commercial crude storage, while Korea and Japan have IEA reserves to fall back on," Wood Mackenzie research director Vima Jayabalan said.

South Korea has already said it would consider releasing oil from its strategic reserves.

Saudi Arabia is set to become a significant buyer of refined products after the attacks, which may have also cut Saudi Aramco's refining capacity, consultancy Energy Aspects said.

Aramco Trading Company (ATC) is making enquiries to buy diesel for prompt delivery, trade sources said.

U.S. gasoline futures rose as much as 12.9%, while U.S. heating oil futures gained 10.8%. China's Shanghai crude futures rose to their trading limit, gaining 8% at the open.

(Graphic: Saudi Arabia crude exports to Asia vs rest of the world, https://fingfx.thomsonreuters.com/gfx/ce/7/6456/6438/SaudiCrudetoAsia.png)

Oil surges 20% after Saudi attack, softens on stockpile hopes
 

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TA XVCI
TA XVCI Sep 16, 2019 4:16PM ET
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All planned. Looking forward to see the huge bearish move this winter, like last year. Slowly getting pumped. I mean, this bad new didn't even make the indexes go down more then 0.5%? It's a joke.
Stacey Beam
Stacey Beam Sep 16, 2019 11:39AM ET
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One more attack and oil goes ballistic. Just one more disruption...
Pwr Strk
Pwr Strk Sep 16, 2019 11:00AM ET
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running on empty
mat abs
mat abs Sep 16, 2019 9:56AM ET
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running on fuel reserved
Jon Bal
Jon Bal Sep 16, 2019 7:28AM ET
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dont tell anyone but i've found the perfect contrarian indicator..trumps twitter feed. it said "PLENTY OF OIL". so im staying long
Hank Williams
Hank Williams Sep 16, 2019 6:18AM ET
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Fires look like they will be burning a while. There are a number of fires.
Vignesh Bathran
Vignesh Bathran Sep 16, 2019 4:06AM ET
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Will gold up or down
James Nelson
James Nelson Sep 16, 2019 3:40AM ET
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isn't it interesting this should happening during the IPO? Saudis blew up there own refinery, lose what they even called negligible amounts of supply to push up price.
James Nelson
James Nelson Sep 16, 2019 3:40AM ET
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isn't it interesting this should happening during the IPO? Saudis blew up there own refinery, lose what they even called negligible amounts of supply to push up price.
Hank Williams
Hank Williams Sep 16, 2019 3:11AM ET
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WS is controlling oil market. Won't let it get over $60 again overnight.
Agaphe Susilo
Agaphe Susilo Sep 16, 2019 3:11AM ET
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who is WS?
Pwr Strk
Pwr Strk Sep 16, 2019 3:11AM ET
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tolja podbrscek
tolja podbrscek Sep 16, 2019 2:08AM ET
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Consolidation is broken. Look daily chart. Go up
mansoor ali
mansoor ali Sep 15, 2019 9:58PM ET
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62 is resistance above 62 will see 70
David Wong
David Wong Sep 15, 2019 8:52PM ET
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Let oil go to $100... I got a bunch in UCO.
Eden Huang
Eden Huang Sep 15, 2019 8:20PM ET
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Watch US treasury bond yields...
El Jefe
el_jefe2020 Sep 15, 2019 8:20PM ET
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They’re not budging.
Eden Huang
Eden Huang Sep 15, 2019 8:20PM ET
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US market is still alseep over that side of the world... Zzzz
Bade Sahib
Bade Sahib Sep 15, 2019 8:20PM ET
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will they go up or down
Jamario Walker
Jamario Walker Sep 15, 2019 7:26PM ET
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Im trading a tight $1 wide long straddle in USO that's looking pretty good right now.
erik maguina
erik maguina Sep 15, 2019 7:26PM ET
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I just thought about this now. how long u think the high rise will go up? I'm guess proces won't go higher then 40% increase.
Adewole Adebayo
Adewole Adebayo Sep 15, 2019 7:17PM ET
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Oil got me stucked between a BUY and a SELL
 
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