MARKET WATCH: Oil price benchmarks drop on Saudi reassurances
Crude oil benchmark prices fell about $1/bbl Sept. 18 in New York and London after Saudi Energy Minister Prince Abdulaziz bin Salman Arabia said he expects full oil production will be restored following damage inflicted by an unmanned aircraft attack.
Crude oil benchmark prices dropped about $1/bbl Sept. 18 on markets in New York and London after Saudi Energy Minister Prince Abdulaziz bin Salman Arabia said he expects full oil production will be restored following damage inflicted by an unmanned aircraft attack (OGJ Online, Sept. 18, 2019).
He said more than half of the 5.7 million b/d of production affected by the disruption had restarted.
Saudi production capacity, he added, will be partly restored to 11 million b/d by the end of September and fully restored to 12 million b/d by the end of November.
Houthi rebels in Yemen have claimed responsibility for the Sept. 14 attacks on a crude oil and NGL processing complex at Abqaiq, which handles 7 million b/d, and at Khurais oil field, which produces 1.5 million b/d (OGJ Online, Sept. 16, 2019).
But Sec. of State Mike Pompeo on Sept. 18 said the attacks had not come from Yemen’s Iran-aligned Houthi group. On Sept. 17, Reuters quoted an unidentified US official as saying the attacks are believed to have originated in southwestern Iran.
Pompeo said US officials wish to assemble a coalition of European and Arab partners to deter Iran after the attack, which Pompeo called “an act of war” against Saudi Arabia.
“This is an attack of a scale we’ve just not seen before,” Pompeo told reporters traveling with him before he arrived in Jeddah for talks with Crown Prince Mohammed bin Salman.
Ole Hansen, Saxo Bank’s head of commodity strategy, said, “For a couple of days, the uncertainty resulted in major price swings before Saudi officials calmed the markets after saying that supplies would be restored sooner than the market had feared.”
Hansen said “the [oil price] spike was painful but could have been a lot worse considering the amount of oil being impacted. Rising oil prices into an economic slowdown leading to lower demand growth is not a good combination.”
Light, sweet crude oil prices and Brent prices jumped more than $8/bbl on Sept. 16. Although oil prices have declined for two consecutive sessions since then, Hansen expects oil prices will find support in coming weeks.
“The geopolitical risk premium, judged to be anything above $60/bbl [for Brent], is likely to take longer to disappear. Iran, which has been accused of being behind the attacks, increasingly finds itself trapped in a corner with rising sanctions pressure making it increasingly impossible to sell its oil.”
Light, sweet crude oil prices on the New York Mercantile Exchange for October delivery fell $1.23 to $58.11/bbl on Sept. 18 while the November contract declined $1.06 to $58.04/bbl.
The October gas price decreased 3¢ to settle at a rounded $2.64/MMbtu on Sept. 18.
Ultralow-sulfur diesel for October fell a rounded 2¢ to $1.97/gal. The NYMEX reformulated gasoline blendstock for October dropped nearly 2¢ to a rounded $1.66/gal.
Brent crude for November fell 95¢ to $63.60/bbl. The December contract decreased 90¢ to settle at $62.66/bbl.
Gas oil for October declined $9 to $611/tonne on Sept. 18.
The average for the Organization of Petroleum Exporting Countries’ basket of crudes for Sept. 18 was $64.57/bbl, down $3.31.
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