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Page added on September 17, 2019
We just learned how easy it is to upend the oil market — and we’re going to pay for it
The attacks on Saudi Arabia’s oil facilities have done more than knock out some 5 per cent of global crude supplies, they have provided a myriad of lessons for all involved.
There is still a high level of uncertainty as to who, what and how exactly Saturday’s attacks were carried out on Saudi Aramco’s facilities, including the massive crude processing plant at Abqaiq.
But what is certain is that 5.7 million barrels per day (bpd) of production has vanished and geopolitics is back driving the oil market.
This renewed risk was reflected in early price moves on Monday in global benchmark Brent crude futures, which surged as much as 20 per cent in early Asian trade, reaching a peak of US$71.95 a barrel before easing back to around 13 per cent higher at US$68.22.
In recent months the oil market has largely discounted geopolitical risk in the Middle East and chosen to focus on the mounting worries that the U.S.-China trade dispute is tipping the global economy toward recession.
The weekend attacks will have blown that market mindset out of the water, and the discussion will now be just how big should the risk premium be in the oil price.
Much will depend on just how long the Saudi facilities are offline, with early speculation of a period lasting at least several weeks.
This may well tighten the crude market substantially, especially in Asia, which takes about two-thirds of the cargoes from the world’s biggest crude exporter.
Yes, the Saudis can export from storage, the United States and other countries can tap into their strategic reserves, and they can probably meet global requirements this way for several months.
U.S. President Donald Trump authorized the release of crude from the Strategic Petroleum Reserve on Sunday, a move that may have tempered some of the rise in oil prices.
However, the longer the Saudi facilities remain offline, the more nervous refiners will become and the more likely they will be to pay a premium to ensure supplies.
For now, the crude market has been reminded that the whole oil market can be upended very quickly, and that the sector has a series of vulnerabilities that can be relatively easily exploited by those seeking to inflict maximum damage.
Iran Pushback
Another lesson is for Trump and his administration, and that is if you ramp up conflict and tensions with a country such as Iran, you must be prepared for the inevitable counter-punch.
The United States has made it clear that it believes Iran is behind Saturday’s attacks, although it has yet to provide firm evidence of this.
But the chances are that this assessment is mostly correct and Iran, if not directly involved, is likely to have supported those who carried out the attacks.
This of course escalates the simmering tensions in the Gulf region, but it’s worth remembering this was started by Trump’s unilateral decision to withdraw from the multinational agreement with Iran on its nuclear program, despite evidence that Tehran was in compliance with the terms of the deal.
The sanctions on Iranian crude oil may not have taken its exports to zero as Trump wanted, but it certainly has cut them substantially, taking them from around 2.3 million bpd to a figure likely under 1 million bpd.
Would Iran have attacked, or acquiesced to one of its numerous Middle East proxies directly targeting the most vital part of Saudi Arabia’s oil infrastructure if the United States had remained party to the nuclear deal?
The weekend attacks dramatically increase the likelihood of an escalation of the conflict, with Trump already warning in a Tweet that the United States is “locked and loaded” and ready to hit back at what he termed the “culprit.”
The oil market now has to price in the possibility of an expansion of the current tensions in the Gulf into a shooting war in which the belligerents target each other’s crude infrastructure and exports.
There is also the possibility that once the immediate emotions of the event calm down that a more measured response emerges and tensions are de-escalated.
But that will probably require that Trump reverses course, and allows Iran back into international crude markets.
Humiliating climbdowns aren’t exactly what Trump is known for, and he’s probably more likely to try to double down and escalate the conflict, without apparently having a plan for how to resolve his issues with Iran.
The weekend attacks should make it absolutely clear that Iran won’t back down and has the ability to wreak havoc in global oil markets.
What the market probably wants to see is a return to a period of cooler heads in global geopolitics, but the chances are this doesn’t happen, and if it doesn’t, this risk will now have to factored into crude prices.
85 Comments on "We just learned how easy it is to upend the oil market — and we’re going to pay for it"
Robert Inget on Tue, 17th Sep 2019 11:27 am
CHINA’S UNIPEC CHARTERS 4 VESSELS TO SHIP U.S. CRUDE AFTER ATTACKS ON SAUDI OIL FACILITIES – SOURCE, DATA
#OOTT
Robert Inget on Tue, 17th Sep 2019 11:44 am
1) Looks like if they don’t screw it up SHALE is baack. Shale makes money @ $60.
2) Chinese must have already bot four to eight million barrels they need to move. (1/2 day’s supply in six week’s travel time).
3) Trump now has leverage over China he didn’t
have last week.
4) All well and good for shale. With Saudi storage
diminishing daily, that cushion goes flatter, hourly.
We gonna need lotsa diesel for harvesting, transporting. When that stash is gone, replacing
Saudi (heavy) oil would have been a snap if Venezuela were still on line.
5) Airlines have been fooled into thinking shortages, if any, will be short lived.
We NEED that heavy (sour) crude from KSA to make jet fuel as well as heating oil.
6) investors should look at Canada and California.
Duncan Idaho on Tue, 17th Sep 2019 11:57 am
We NEED that heavy (sour) crude from KSA to make jet fuel as well as heating oil.
And diesel. Shale doesn’t produce much diesel.
The world runs on diesel.
Davy on Tue, 17th Sep 2019 12:06 pm
Idaho, buddy, you do realize that the US produces more than shale..right?
https://www.eia.gov/dnav/pet/PET_CRD_CRPDN_ADC_MBBLPD_M.htm
You act so smart about oil so look at the chart and figure out what is heavy and what is not.
Boney Joe on Tue, 17th Sep 2019 12:09 pm
‘Low-Flying’-Missiles Used In Aramco Attack Were Launched Inside Iran: Report
The US has reportedly traced the cruise missiles used during a weekend attack that crippled half of Saudi Aramco’s oil production back to their point of origin: Iran. Or at least that’s what one US official is telling CBS News. Many have argued that there’s zero upside for Iran in carrying out attacks like this (the region has also endured several attacks on oil tankers that have been blamed on Iran), but the US has insisted that Tehran was responsible for the attack, and that the missiles used were beyond the sophistication of Yemen’s Houthis, who had initially taken credit for the attacks. Senior US officials have told CBS they’ve identified the locations in Iran from which a combination of more than 20 drones and cruise missiles were launched against the Saudi oil facilities. They say the locations are in southern Iran at the northern end of the Persian Gulf. — Paul Danahar (@pdanahar) September 17, 2019 According to US sources, 17 missiles or drones were fired, not the 10 the Houthis claim. Cruise missiles may have been used, and some targets were hit on the west-northwest facing sides, which suggests the projectiles were fired from the north, from Iran or Iraq. Investigators have reportedly identified the exact location, purportedly in southern Iran, where a combination of more than 20 drones and cruise missiles were launched against the Saudi oil facilities. Additionally, The Wall Street Journal reports that Saudi Arabia is increasingly confident that Iran directly launched a complex missile and drone attack from its southern territory on Saturday that battered the kingdom’s oil industry, according to people familiar with the investigation. “Everything points to them,” said a Saudi official who wasn’t authorized to speak to the media, referring to Iran. “The debris, the intel and the points of impact.” Nevertheless, lawmakers from both parties in Washington have expressed reservations about the prospects of an American military strike on Iran.
Nostradamus on Tue, 17th Sep 2019 12:11 pm
Oil Prices Plunge On Reports Saudi Output Levels Normalized With 2-3 Weeks
WTI and Brent oil prices are plunging after Reuters headlines, quoting sources briefed on the matter, that Saudi oil output will return to normal quicker than initially thought. WTI is back down to a $59 handle for now – so not entirely convinced…Brent is down 5% on the news as a “top Saudi source” confirms that Saudi output will be fully back online in next 2-3 weeks. S&P Energy stocks are tumbling too…
Robert Inget on Tue, 17th Sep 2019 12:19 pm
govttrader
@govttrader
“One of our team just picked up that Saudi has pulled billions of cash from US Markets in the last 24 hours to support their own economy after the oil attacks… Add that to the treasury refunding payments and new cash… And you can see how a squeeze developed.”
9:32 AM · Sep 17, 2019·TweetDeck
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Retweets
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govttrader
@govttrader
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So, the Saudis pulled somewhere around $50 bln out of the US banking system to stabilize their own economy.
This should normally be an easy thing for the Feds NY markets desk to manage…but they seem to have been caught asleep at the wheel.
Robert Inget on Tue, 17th Sep 2019 12:26 pm
Does this ‘withdrawal’ belie recent press releases
telling the world everything will be back on line in a few days, weeks?
But…why REMOVE funds from USD’s if Saudis were seeking safety? Eh.
LUV to know to what currency THAT 50 BILLION
got converted.
Robert Inget on Tue, 17th Sep 2019 12:32 pm
http://www.livecharts.co.uk/ForexCharts/dollarindex.php
USD Black Swan Dive
Chrome Mags on Tue, 17th Sep 2019 12:33 pm
“One of our team just picked up that Saudi has pulled billions of cash from US Markets in the last 24 hours to support their own economy after the oil attacks…”
At the same time the Saudi’s claim to be pulling oil from storage. I wonder if the oil from storage is insufficient to make up for reduced production.
Outcast_Searcher on Tue, 17th Sep 2019 12:36 pm
Same as it ever was. Just because people are short term thinkers and assumed the risk was low never meant it went away.
The need for more security, should it ensue, will add a premium to prices. Again, same as it ever was.
If it gets bad enough, maybe the US will wake up and realize energy security can be better obtained by efficiency and using green energy for transport (including transition vehicles like HEV’s) instead of spending $trillions brandishing weapons in the Middle East.
It’s not like the US doesn’t have better things to spend the money on like education, infrastructure, balancing the budget, etc.
Robert Inget on Tue, 17th Sep 2019 12:41 pm
I see a ‘fine Italian hand’ of Putin behind this entire scam.
Risk premiums should eventually drive Brent to $75 or more. Big winner by far, is Russia.
Robert Inget on Tue, 17th Sep 2019 12:47 pm
@FirstSquawk
8h8 hours ago
More
SENIOR YEMENI MILITARY COMMANDER TOLD THE LEBANESE AL-MAYADEEN TV CHANNEL THAT TARGETING THE OIL FIELDS DEEP IN SAUDI ARABIA IS A STRONG MESSAGE THAT THE UAE SHOULD ALSO READ
Robert Inget on Tue, 17th Sep 2019 12:50 pm
First Squawk
@FirstSquawk
9h9 hours ago
More
NIGERIA’S NEMBE CREEK TRUNK LINE, WHICH EXPORTS BONNY LIGHT CRUDE OIL, UNDER FORCE MAJEURE
Cruise missiles or drones?
FuelShortageComing on Tue, 17th Sep 2019 12:58 pm
Arab are too stupid to fix or build anything. They need the money because they need to hire Whites Western engineering firm to fix the damages. I hope engineering firm charge them double. Milk these fucking primitive baboons as much as we can. Sell them more weapons too, at the discount rate if needed too, so they kill each other more and faster.
Negro and Arab should be treat as animal.
eugene on Tue, 17th Sep 2019 12:59 pm
Long ago, I learned the role of media is to convince the masses that certain things are true. In mere minutes, it was Iran that did this. No proof, no evidence just the words of the “messiah” (Trump) are sufficient to be proof). As a consequence, the media will rant various “facts” which prove it was Iran.
Some yrs ago, I read that Russians had zero faith in what they were told. The author simply said “Americans had yet to learn to distrust theirs”.
In this case, I will read decade or so from now that the facts were bullshit just as the “facts” that facilitate mass belief in invasions of Iraq, Libya, etc are creations.
In America, tracks don’t even have to be covered. The masses, nightly, are informed of what to believe, what to think and, most of all, what to be pissed off about.
Anonymous on Tue, 17th Sep 2019 1:18 pm
The market hasn’t changed the long term risk premium:
https://twitter.com/NicoLongShort/status/1173970614467645440
Look at the blue and green curves, before and after the drone attack. Look at the 2024+ contract prices. No movement.
So the financial markets don’t see a systemic shift. Of course they might be wrong. Still, that’s the collective betting wisdom.
Davy on Tue, 17th Sep 2019 1:46 pm
Nony is right, it is too early to have a war dance like our forum extremist want. Lots of unanswered questions.
juanPaultard Fucktard on Tue, 17th Sep 2019 1:52 pm
we don’t want the stupid cunt on my board anymore
Davy said Nony is right, it is too early to have a war dance….
Davy on Tue, 17th Sep 2019 2:13 pm
Oops, sorry for getting all triggered and losing my widdle temper again everyone, and for using the ‘C’ word. My mommy always told me the ‘C’ word was real bad. Even more badder then the ‘F’ word.
Fucktard JuanPaultar on Tue, 17th Sep 2019 2:26 pm
ID theft
Davy said Oops, sorry for getting all triggered and losing m…
Davy on Tue, 17th Sep 2019 2:30 pm
Oops, sorry again everyone. I forgot the ‘d’ in JuanPaultard.
Davy on Tue, 17th Sep 2019 3:36 pm
I sucked so much cock last night that I’m probably pregnant.
Fucktard juanPaultard on Tue, 17th Sep 2019 3:49 pm
Ban the pussy. He has not contributed any knowledge for 2 years now. Basically The dumb fuck is polluting the forum with his mental illness.
Davy said I sucked so much cock last night that I’m probably…
Davy Sock said Miami Beach Maggot
Davy said Oops, sorry again everyone. I forgot the ‘d&…
claes on Tue, 17th Sep 2019 3:51 pm
Well spend money.
Outcast says: It’s not like the US doesn’t have better things to spend the money on like education, infrastructure, balancing the budget, etc.
With out all that military spending China would have been all over South East Asia by now, and after that only god knows what.
Outcast, make your choise. Would you like Chinese imperialism or US-imperialism, or maybe even Russian imperialism.
Afterall you are allowed to critizise American empirialism in public.
Both Russia and China have a tendency to jail their opponents, or maybye just let them disappear. Pick your choise
claes on Tue, 17th Sep 2019 4:13 pm
Both China and russia were empires. The Chines had an emperor- the Russians a czar (which means emperor), and they both still have empirialistic dreams of former greatness.
The only “empire” that allows criticism, democracy, free thought and free movement is ours own dear beloved and hated US.
The Church Lady on Tue, 17th Sep 2019 5:03 pm
Mr. Davy,
Your disgusting mouth (cunt, fuck, etc.) is entirely inappropriate. Clean up your act NOW or you will be reported to administration and you know what that means….another session in the rubber room.
More Davy Childish ID Theft on Tue, 17th Sep 2019 5:04 pm
Boney Joe on Tue, 17th Sep 2019 12:09 pm
Fucktard juanPaultard on Tue, 17th Sep 2019 5:06 pm
ban the cunt
More Davy Childish ID Theft said Boney Joe on Tue, 17th Sep 2019 12:09 pm
The Church Lady said Mr. Davy, Your disgusting mouth (cunt, fuck, etc.)…
Davy on Tue, 17th Sep 2019 5:53 pm
Oops, sorry for getting all triggered and losing my widdle temper again everyone, and for using the ‘C’ word. My mommy always told me the ‘C’ word was real bad. My mommy needs to wash my widdle mouth out with soap.
Fucktard juanPaultard on Tue, 17th Sep 2019 6:01 pm
Ban the prick
Davy said Oops, sorry for getting all triggered and losing m…
makati1 on Tue, 17th Sep 2019 6:03 pm
claes…really? The US is a Police State to match any in history.
https://www.theburningplatform.com/2019/08/28/the-american-gulag-brick-by-brick-our-prison-walls-get-more-oppressive-by-the-day/#more-203267
http://endoftheamericandream.com/archives/as-the-nfl-season-begins-the-social-decay-in-nfl-cities-is-worse-than-ever
https://www.globalresearch.ca/usa-pretend-unmasked/5688927
https://www.globalresearch.ca/west-oppressed-third-world-it-became-third-world-itself/5688022
http://thesaker.is/new-world-order-in-meltdown-but-russia-stronger-than-ever/
https://www.zerohedge.com/health/americans-spent-nearly-150-billion-illegal-drugs-last-year
And on and on…
You can deny but that changes nothing.
Miami Beach maggot on Tue, 17th Sep 2019 6:03 pm
I could stop this insanity but I love it. Sorry folks I am an egotistical asshole who does not give a shit about this forum. Go whine somewhere else.
Davy on Tue, 17th Sep 2019 6:03 pm
Oops, sorry for getting all triggered and losing my widdle temper again everyone, and for using the ‘P’ word. My mommy always told me the ‘P’ word was real bad. My mommy needs to wash my widdle mouth out with soap.
Davy on Tue, 17th Sep 2019 6:06 pm
Thanks for all those links makato!
Fucktard juanPaultard on Tue, 17th Sep 2019 6:07 pm
Ban the prick
Davy said Thanks for all those links makato!
Davy said Oops, sorry for getting all triggered and losing m…
Davy wrote this obv. on Tue, 17th Sep 2019 6:08 pm
I could stop this insanity but I love it. Sorry folks I am an egotistical asshole who does not give a shit about this forum. Go whine somewhere else.
Ban the lunatic juanPaultard on Tue, 17th Sep 2019 6:08 pm
“https://browserspy.dk/webserver.php
and fill in peakoil.com, you get that the server is hosted by Cloudflare:
https://en.wikipedia.org/wiki/Cloudflare
Cloudflare is one of the last bastions of free speech, under lefties also known as “hate speech”. It is very sad that the admin of this site doesn’t seem to want to take the trouble to log in to his server dashboard and active a few presets, enforcing posters to post under a unique username/password combination. That doesn’t eliminate garbage under fake identities, but at least it stops identity theft and that would make a hell of a difference. If possible, you could also enforce that one IP-address can only post under a single identity. Please admin, invest an hour of your time to get this right.”
The Church Lady on Tue, 17th Sep 2019 6:12 pm
Mr. Davy,
“I sucked so much cock last night that I’m probably pregnant.”
Your language is a little hard to “swallow”, but that can be forgiven due to your honest dialogue.
It’s a baby step toward your reintegration.
Davy on Tue, 17th Sep 2019 6:13 pm
I am spending less time on this lame unmoderated forum to concentrate on my own blog. I do want to thank all those who have attacked me with giving me material for growth. I have saved the best of my comments for my new blog. I have years worth of material. I have enjoyed moderating the worst of you and neutering your selfish useless agendas. I will still be here it is just I will be spending more time putting out a blog. I don’t expect much of a following with my blog. This is more a personal effort to assemble what I have learned over the last 10 years of formulating my REAL Green Deep Adaptation. Many of my ideas and lifestyles are not mine. I barrow what ever works. I do not claim anything either. It is an open source effort. Anyone can take what I am offering and use it however you want. Take my title if you like. For the stalkers here I hope you find my blog and visit the comment forum. It will be only lightly moderated to prevent juanpee identity theft and excessive cloggo spamming. LOL. There will be a prize for juanpee and annoymouse if you can stalk my blog. Double LOL. Anyway fuck my enemies and many thanks to those who contributed to my metamorphous.
I guess I could have joined the moderated section at PO dot com, but I knew I’d get my ass permanently banned. I’ll try not to let the door smack me up the backside on the way out.
Goodbye to ALL of you dumbasses.
Davy on Tue, 17th Sep 2019 6:14 pm
Just a quick reminder to all that I am spending less time on this lame unmoderated forum to concentrate on my own blog. I do want to thank all those who have attacked me with giving me material for growth. I have saved the best of my comments for my new blog. I have years worth of material. I have enjoyed moderating the worst of you and neutering your selfish useless agendas. I will still be here it is just I will be spending more time putting out a blog. I don’t expect much of a following with my blog. This is more a personal effort to assemble what I have learned over the last 10 years of formulating my REAL Green Deep Adaptation. For the stalkers here I hope you find my blog and visit the comment forum. It will be only lightly moderated to prevent juanpee identity theft and excessive cloggo spamming. LOL. There will be a prize for juanpee and annoymouse if you can stalk my blog. Double LOL. Anyway fuck my enemies and many thanks to those who contributed to my metamorphous.
I guess I could have joined the moderated section at PO dot com, but I knew I’d get my ass permanently banned. I’ll try not to let the door smack me up the backside on the way out.
Goodbye to ALL of you dumbasses.
The Church Lady on Tue, 17th Sep 2019 6:16 pm
Mr. Davy,
Keep up the good work, kid. At bible study this evening we will have a prayer for your recovery.
Fucktard juanPaultard on Tue, 17th Sep 2019 6:19 pm
ban the cunt
The Church Lady said Mr. Davy, Keep up the good work, kid. At bible stu…
Davy said Just a quick reminder to all that I am spending le…
Davy said I am spending less time on this lame unmoderated f…
The Church Lady said Mr. Davy, “I sucked so much cock last night…
claes on Tue, 17th Sep 2019 6:20 pm
Mak i’m not denying anything, I’ve just made a choise over which evil empire i would like to live in.
You have chosen the P-empire (how many ethnic groups and religions are you in there ?)
I stick to the whiteys for better or worse. More or less because of the freedom of speech, thought and religion, which I think is a pretty scarce resource around the world in general.
Davy on Tue, 17th Sep 2019 6:22 pm
claes, makato thinks you are American you may want to remind him you are not.
claes on Tue, 17th Sep 2019 6:50 pm
Freedom of speech and even science is under heavy pressure even in the western world, but we still have it.
The problem is “political correctness”, which seems to be the new censorship, but time may correct that. I will do my best to correct it.
The american life is not my favorite, but at least it can be changed, and I can have my word in that process.
makati1 on Tue, 17th Sep 2019 6:59 pm
You have no real freedoms, claes. if you are an Amerikan all of your moves are watched and recorded. You break at least 3 laws everyday without realizing it. When the SHTF the government can put you away or not let you leave the country.
If you are European, well, it is not much better. Maybe worse. Shit is shit no matter where it falls. The West is toast. Whitey is dying out. Permanent tan is the future.
But it will not really matter when the SHTF, anyplace in the West will become 3rd world and worse. It is much more painful to fall from the top of the ladder than the bottom. I moved down to a level where I still enjoy life without the stress of being in Amerika.
Religions in the Philippines?
Roman Catholic Christianity – 80.6%
Protestant Christianity – 8.2%
Islam – 5.6%
Ethnic groups? Many, but they are not at war with each other as in the West. They have existed for over 1,000 years together.
You made your choice, as did I. I am happy, safe and comfortable here. 11+ years has only proved that my decision was a good one…for me.
claes on Tue, 17th Sep 2019 7:02 pm
Davy , does it really matter if I’m american or danish. We do share the same destiny. Growing up with Disney, jazz, hippie-culture, Greenpeace, drugs and whatever, we are basically the same. At least 3 persons within a gun shots distance have served in Afghanistan. Really – we are in the same boat.
claes on Tue, 17th Sep 2019 7:40 pm
Mak, there are no real freedom, just degrees of liberties. Some countries have more, others less. For the moment being i’m rather content with my level of freedom.
I guess you feel the same, and I’m glad on your behalf.
I’m just a little afraid of your great neighbor that migth have a different view on things like free speech etc.
Duncan Idaho on Tue, 17th Sep 2019 7:54 pm
Why is Trump going to Rio Rancho?
Because no one on his team could spell Albuquerque.