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Oil prices surge after attacks slash Saudi output
HONG KONG, Sept 16, 2019 (BSS/AFP) – Oil prices saw a record surge Monday
after attacks on two Saudi facilities slashed output in the world’s top
exporter by half, fuelling fresh geopolitical fears as Donald Trump blamed
Iran and raised the possibility of a military strike on the country.
Brent futures surged $12 in the first few minutes of business — the most
in dollar terms since they were launched in 1988 and representing a jump of
nearly 20 percent — while WTI jumped more than $8, or 15 percent.
Both contracts pared the gains as the day wore on but were still up nearly
10 percent.
The attack — claimed by Tehran-backed Huthi rebels in neighbouring Yemen,
where a Saudi-led coalition is bogged down in a five-year war — hit two
sites owned by state-run giant Aramco and effectively shut down six percent
of the global oil supply.
Trump said Sunday the US was “locked and loaded” to respond to the attack,
but was in talks with Riyadh.
And Secretary of State Mike Pompeo said: “The United States will work with
our partners and allies to ensure that energy markets remain well supplied
and Iran is held accountable for its aggression.”
Tehran denies the accusations but the news revived fears of a conflict in
the tinderbox Middle East after a series of attacks on oil tankers earlier
this year that were also blamed on Iran.
But The New York Times reported that US officials had satellite images
showing the attacks — possibly with drones and cruise missiles — had come
from the north or northwest. That indicated they were sourced in the northern
Persian Gulf, Iran or Iraq, rather than Yemen.
China on Monday called for the US and Iran to “exercise restraint”.
“Tensions in the Middle East are rising quickly, meaning this story will
continue to reverberate this week even after the knee-jerk panic in oil
markets this morning,” said Jeffrey Halley, senior market analyst at OANDA.
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Trump authorised the release of US supplies from its Strategic Petroleum
Reserve, while Aramco said more than half of the five million barrels of
production lost will be restored by tomorrow.
But the strikes raise concerns about the security of supplies from Saudi
Arabia and elsewhere.
“The implications of these attacks are far-reaching and lasting, going
well beyond the immediate disruption to albeit a very large portion of global
output,” said Neil Wilson, chief market analyst at Markets.com.
“It is a material escalation in the risks to supply and, in short, traders
now worry that Saudi Arabian oil production can be swiftly and easily knocked
out.”
– Energy firms surge –
Oil prices had dropped last week after news that Trump had fired his anti-
Iran hawkish national security adviser John Bolton, which was seen as paving
the way for an easing of tensions in the region.
“One thing we can say with confidence is that if part of the reason for
last week’s fall in oil and improvement in geopolitical risk sentiment was
the news of John Bolton’s sacking… and thought this was a precursor to some
form of rapprochement between Trump and Iran, then it is no longer valid,”
said Ray Attrill at National Australia Bank.
The surge in crude lit a fire under energy firms, with Hong Kong-listed
CNOOC up 7.4 percent and PetroChina 4.3 percent higher. Woodside Petroleum
rallied more than four percent in Sydney.
However, airlines took a hit from the prospect of higher fuel costs.
Cathay Pacific dropped four percent in Hong Kong, Air China dropped 4.6
percent in Shanghai and Qantas dived more than four percent in Sydney.
Asian stock markets were mostly down after last week’s rally that was
fuelled by China-US trade hopes, while investors are awaiting a key Federal
Reserve policy meeting hoping for another cut in interest rates.
Shanghai was marginally lower after data showed China’s huge economy
showed further signs of slowing last month, with retail sales, fixed-asset
investment and industrial production all missing forecasts.
Hong Kong sank 0.8 percent after fresh violent protests struck the city at
the weekend, while Singapore shed 0.1 percent and Jakarta sank two percent.
There were also losses in Mumbai and Wellington. Tokyo was closed for a
holiday.
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Sydney added 0.1 percent, Seoul gained 0.6 percent and Taipei was 0.7
percent higher.
In early trade, London fell 0.4 percent, while Frankfurt and Paris shed
0.6 percent apiece.
On foreign exchanges, higher-yielding currencies dropped as traders
shifted to safe-haven units such as the yen and dollar, while gold — a go-to
asset in times of uncertainty — rose more than one percent.
The pound held around seven-week highs owing to easing fears of a no-deal
Brexit, with eyes on a meeting between Prime Minister Boris Johnson and
European Commission chief Jean-Claude Juncker later in the day.
– Key figures around 0810 GMT –
West Texas Intermediate: UP $4.23 at $59.08 per barrel
Brent North Sea crude: UP $5.07 at $65.29 per barrel
Hong Kong – Hang Seng: DOWN 0.8 percent at 27,124.55 (close)
Shanghai – Composite: FLAT at 3,030.75 (close)
London – FTSE 100: DOWN 0.4 percent at 7,336.63
Tokyo – Nikkei 225: Closed for a public holiday
Pound/dollar: DOWN at $1.2470 from $1.2496 at 2030 GMT
Euro/pound: UP at 88.80 pence from 88.66 pence
Euro/dollar: DOWN at $1.1075 from $1.1078
Dollar/yen: DOWN at 107.85 yen from 108.11 yen
New York – Dow: UP 0.1 percent at 27,219.52 (close)
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