Oil rises sharply after Saudi supply shock, stocks slide

MILAN (Reuters) – Oil prices hit their highest level in four months on Monday, and world prices slid after weekend attacks on crude production facilities in Saudi Arabia, prompting oil shutdowns. about 5% of the global supply and concern about the impact of the oil shock on economic growth.

Brent futures have risen nearly 20% at some point, their biggest gain in a day since the Gulf War in 1991, and US futures have jumped nearly 16%, reaching both their highest level since May. But prices reached their peak after US President Donald Trump authorized the use of the country's emergency stocks to ensure a stable supply.

At 8:23 am GMT, Brent futures rose 8.75 percent to $ 65.49 per barrel, while US light crude rose 7.8 percent to $ 59.13.

Oil market turmoil and poor economic data from China have boosted investor demand for safe haven assets, pushing the Japanese yen and the Swiss franc higher and causing euro zone bond yields to fall.

Global equities ended a four-day winning streak and lost 0.16%. European stocks fell 0.55% and Wall Street also signaled a weak start as E-Mini futures for the S & P 500 lost 0.34%.

Soaring crude prices come at a time when the central banks of the United States, Europe and Asia are loosening their monetary policy to combat the slowdown in the global economy in the context of A long trade war between Washington and Beijing.

"Soaring oil prices when the global economy was already flirting with the idea of ​​recession are not ideal and, if they repeat and hold, could ultimately tip us over," he said. said Craig Erlam, an analyst at OANDA in London.

Chinese data also highlighted concerns about the slowdown in the world's second-largest economy. Industrial production rose at its weakest pace in 17.5 years, due to increasing pressure from US trade and slowing domestic demand.

Trump also said that the United States was "stranded and charged" with a view to a potential response to strikes in Saudi facilities, after a senior official of his administration said that Iran was to blame.

This exacerbated fears over tensions in the Middle East and the worsening of relations between Iran and the United States, fueling safe-haven assets, with gold reaching $ 1,502.1 billion. Ounce, up 0.92%.

"The biggest problem is knowing what high-end markets will incorporate to reflect the risk of future attacks," said Kerry Craig, global markets strategist at JP Morgan Asset Management.

"In the very short term, we could also see a recovery in the shelters," he added.

"Central banks will likely look at the inflationary impact of rising oil prices, but the increased geopolitical risk in an already fragile environment will not go unnoticed."

The US Federal Reserve is due to hold its policy meeting on Wednesday, during which it is expected to significantly lower interest rates and signal its future direction.

SAUDI BONDS HIT

Dollar-denominated bonds issued by the Saudi government and public oil company Saudi Aramco fell for several weeks after the attacks.

Saudi Aramco's long-term bonds were hardest hit by the collapse of the 2049 issue, which lost nearly 3 cents to its lowest since early August, according to Tradeweb data.

"The markets have become overly optimistic over the last few months about the geopolitical risks faced by the US allies against Iran, with Saudi Arabia being particularly vulnerable," said Patrick Wacker of the United States. UOB Asset Management.

"Although Saudi Arabia's sovereign fundamentals remain strong, bond prices will need to take into account higher geopolitical risk in the future," he added.

In the currency markets, Saudi news pushed the yen up 0.2% to $ 107.88, while boosting the currencies of oil-exporting countries.

The Norwegian krona rose by almost 0.7%, then stood at 8.9517 crowns against the dollar, up 0.37% while the Canadian dollar rose 0.23% to 1, $ 3253 CA. The Russian ruble was also higher.

The currencies of oil importers such as Turkey and India underperformed.

The US dollar has changed little in relation to a basket of currencies.

Elsewhere in the bond markets, long-term core bond yields in the euro area declined slightly as a result of the publication of China's mediocre data, which boosted the demand for safe haven assets.

Germany's 10-year benchmark index was down 1bp to -0.46%. Bund futures advanced 0.12% while 10-year Treasury futures advanced 0.27%.