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Today the economy - Why the attack against Saudi Arabia propels the oil markets


The oil markets reacted strongly this morning to the drone fire that destroyed the Saudi oil facilities on Saturday. The...

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Why the attack on Saudi Arabia propels the oil markets

The oil markets reacted strongly this morning to the drone fire that destroyed the Saudi oil facilities on Saturday. The price of crude rose by 10%. This offensive claimed by the Houthis of Yemen reveals the great fragility of the first producing country of OPEC.

The first reaction of the oil markets reflects the shock wave caused by this attack. Because overnight Saudi Arabia's daily production has been halved and obviously no one believes that it will return to normal on Monday as committed yesterday the Aramco, the Saudi national company. It will take weeks to find the missing 5 million barrels a day. Drones fired by the Houthis of Yemen have targeted the Abqaiq facilities, among other things, where 70% of Saudi crude is processed prior to export. It is the jugular of the Saudi production which was destroyed.

We discover with this attack the extreme vulnerability of the kingdom.

This is the most important attack of the last thirty years, since the Gulf War. It has done away with almost 6% of the world supply overnight. There have been other attacks against Saudi facilities in recent months. Against oil pipelines, tankers in the Strait of Hormuz. But this is a nerve center of production that is affected. And Saudi Arabia has always presented itself as the key country in the oil markets, the only one able to open or close the tap at will to control the course has suddenly become the weak link in the system. This is why the price of crude oil has not finished heating. A risk premium of $ 10 could sustain the prices sustainably.

Donald Trump has authorized tonight the use of US strategic reserves, it could help calm the markets?

This is the function of these strategic reserves, reserves that all major consumer countries also have at their disposal. Let us not forget that Saudi Arabia itself has significant stocks. But tap into these reserves can also have a bullish effect on prices, because it highlights the gravity of the situation. To avoid the overheating of the oil markets there will certainly be a revival of production in the United States, which is the world's largest producer, and why not in OPEC member countries, of which Saudi Arabia is the commander-in-chief . A sudden rise in the price of oil is positive for producers, but they know it can turn against them. In the medium term, an increase in the price discourages consumption. The oil countries already affected by the economic sluggish environment do not really need it.

Saudi Arabia is trying to get out of this dependence on black gold. This attack accelerates or compromises his efforts ?

The attack does not call into question the merits of its projects, on the contrary, but it could actually delay them. It is difficult, for example, to attract tourists as the kingdom does, relying on a host of influencers invited to the spot when images of burning oil installations are looping on all the screens of the world. This counter-advertising is also particularly unwelcome as Saudi Arabia seeks to float its sacred cow, the Aramco, the national oil company.

In a nutshell: Chinese industrial production at its lowest point in 17 years,

According to figures released for the month of August, its annual growth rate dropped to 4.4%. Prime Minister Li Keqiang acknowledged that it is now increasingly difficult for Beijing to maintain economic growth above 6%, which is roughly the norm for the last thirty years in the Middle Kingdom.

The American automotive industry will know its first strike for twelve years .

In the absence of an agreement on wage increases and health insurance, General Motors' main union called on workers to stop work. The last major call to strike at the number one US auto was in 2007. Some 73,000 workers had stopped work for two days. Today, they are only 46,000 employees.

Source: rfi

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News/Politics 2019-09-18T14:44:27.898Z

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