Barrel under attack: attack on Saudi plants triggered a sharp increase in oil prices

On Monday, September 16, oil prices rose sharply in the global market. During the opening of trading on the ICE exchange in London, the raw materials of the Brent benchmark rose immediately by 19.5% to $ 71.95 per barrel. The value has become the maximum since May 2019.

In the middle of the trading session, quotes returned to around $ 65 per barrel. At the same time, prices still remain near the highest levels in recent months.

Experts associate a record jump in prices with the undermining of oil facilities in Saudi Arabia. On Saturday, September 14, unmanned aerial vehicles attacked two Saudi Aramco oil refineries. As a result of the attacks, the state corporation suspended production of about 5.7 million barrels per day. Thus, oil production in the kingdom fell by half. This was stated by Minister of Energy Abdel-Aziz bin Salman, SPA agency reports.

A significant drop in production in one of the largest states - oil exporters in the world came as a complete surprise to investors. Market players began to fear interruptions in energy supplies, and quotes began to grow. This was in an interview with RT, a leading analyst at QBF Oleg Bogdanov.

“The gap in price between the closing of Friday and the opening of trading on Monday amounted to almost 20%. This is the maximum value in the history of the futures market. You can understand the players, the world oil market has lost almost 6 million barrels per day, and it is unclear when supplies will resume. Such risks were not previously considered by investors. Now, players will have to win back the unstable situation in Saudi Arabia, which will inevitably add to prices from $ 5 to $ 10, ”Bogdanov explained.

According to the Minister of Energy of Saudi Arabia, part of the losses will be compensated by the reserve storage facilities of the kingdom. At the same time, the country's authorities expect to restore oil production by a third by the evening of Monday, September 16, reports The Wall Street Journal, citing sources. However, RT analysts interviewed believe that it will take a longer period of time to repair the damage.

“The fact is that the observed damage to oil refineries is quite serious, and restoring them in a few days is a very difficult task. Most likely, we can talk about a week or more, ”Artyom Deev, head of the AMarkets analytical department, explained in an interview with RT.

To maintain the previous level of oil supplies on the world market, the United States intends to use its own strategic reserves of raw materials. About this on Sunday wrote the President of the United States Donald trump on Twitter.

According to the assessment of the head of the Russian Ministry of Energy Alexander Novak, today the world’s oil reserves should be enough to compensate for losses from a decrease in production in Saudi Arabia. At the same time, the Minister believes that the incident could seriously affect energy security around the world. According to him, after the attack on Saudi Aramco, Russia can strengthen the level of protection of its own oil facilities, reports TASS.

Hot region

The situation with a decrease in mining capacities in Saudi Arabia has led investors to fear increased geopolitical tensions in the Middle East. Thus, the armed group of Yemeni Hussite rebels claimed responsibility for the attack on the Saudi Aramco refinery. According to their spokesman, Yahya Sari on Al Masirah, the attacks will continue until the war in Yemen ends.

In 2014, a civil war broke out in Yemen. The current president’s government fled the capital and requested foreign support. Meanwhile, power in a number of regions passed to the Hussites. In 2015, an international coalition of seven states (Bahrain, UAE, Kuwait, Morocco, Sudan, Egypt, and Saudi Arabia) launched a military intervention against the Hussites.

Remarkably, at the same time, the United States accuses Iran of attacking Saudi oil facilities. According to US Republican Senator Lindsey Graham, the US needs to hit the Iranian refinery in response to Tehran’s actions. The politician wrote about this on Twitter.

It is possible that the aggravation of the conflict between Iran and the United States can also provoke disruptions in oil supplies in the Middle East. This was stated in an interview with RT by the head of the CAFT analyst group Mark Goichmann.

“Accusations from the US against Iran in organizing the attack and a call for retaliatory strikes against objects of the Islamic republic add fuel to the fire. And this is already fraught with even more serious consequences for the market. Thus, even regardless of the quick recovery of losses promised by Saudi Arabia, the market simultaneously lays down these new risks in prices, ”said Goikhman.

According to the analyst, over the next few months, oil prices will be in the range of $ 64-68 per barrel. According to the forecast of Artyom Deyev, if the situation in the region stabilizes, quotes may return to the level of $ 59-62.

Ruble in business

The Russian financial market reacted positively to rising oil prices. At the opening of trading on the Moscow Exchange on September 16, the dollar fell by 0.9% and for the first time since early August fell below 64 rubles. The euro exchange rate lost almost 1% and amounted to 70.5 rubles.

The country's stock market has also updated the highs of recent months. At the beginning of trading, the Mosbirzhi index added about 1% and reached the level of 2821 points. The last time a similar value could be observed on July 11.

In the middle of the trading session, growth leaders were shares of oil and gas companies. Thus, Rosneft securities grew in price by 3.51%, LUKOIL - by 2.75%, Surgutneftegaz - by 2.72%, NOVATEK - by 2.27%.

According to Oleg Bogdanov, recently, due to the budget rule, oil prices have less and less influence on the Russian currency. Nevertheless, the observed sharp jump in commodity quotes nevertheless provoked a strengthening of the ruble. According to Mark Goichmann, in the medium term, the dollar will remain in the range of 63–67 rubles.

At the same time, RT analysts surveyed admit a more serious strengthening of the national currency.

“Under current conditions and the fixing of oil prices at the level of $ 70 and higher, the exchange rate of the Russian currency may strengthen in the direction of 60–62 rubles per dollar and 68–69 per euro. I think that the Russian ruble is unlikely to strengthen stronger, but everything will depend on the whole on the geopolitical situation and macroeconomic statistics, ”said Vyacheslav Abramov, director of the BCS Broker sales office, in an interview with RT.