Oil price explosion – Brent Brute surges 20%

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Traders have been trying to calculate the advance of oil in oil after Saturday's attack by a drone against "the largest oil processing plant in the world." And a few moments ago, Brent crude was reopened to trading, rising almost 20%, its biggest leap in 28 years.

Bloomberg notes that this attack resulted in the biggest disruption ever recorded in the oil markets, overtaking the loss of oil supplies from Kuwait and Iraq in August 1990 when Iraq invaded. its southern neighbor. It also exceeds the loss of Iranian oil production in 1979 during the Islamic revolution, according to data from the US Department of Energy. "

Moreover, in light of reports that the Saudi outage could last for months, this could only be a start. As a reminder, Sandy Fielden, director of research at Morningstar, said: "Brent could go to $ 80 tomorrow, while the WTI could go to $ 75 … But that would depend on the 48-hour update Aramco. The supply problem will not be clear right away as the Saudis can still deliver from stocks. "

Of course, if Aramco confirms that the outage will last for weeks, expect the Brent Attack to continue until the price rises to $ 80 and continues to rise.

Finally, here is the summary of Damien Courvalin, Goldman 's commodities strategist, who presented earlier today four possible shutdown scenarios, the price of which could be affected:

  • A very short breakdown – a week for example – would probably lead to a rise in prices in the long term, reflecting a rising risk premium, but lower than last autumn, due to a dripping Permian shale basin, prospects weaker growth and strong output growth outside OPEC in 2020. Such an impact on prices could be $ 3 to $ 5 per barrel.
  • A breakdown at current levels of two to six weeks In addition to this long-term price trend, the Brent short-term curve (1 month vs. 2 years) would be increased from $ 2 to $ 9 per barrel, respectively. All in, the expected price movement would be between 5 and 14 USD / bar, depending on the duration of the outage(A six-month interruption of 1 Mb / d would be similar to a six-week interruption at current levels).
  • If the current level of failure should be announced to last more than six weeks, we expect that Brent prices increase rapidly above $ 75 per barrel, which we believe a SPR version would likely implement, large enough to balance such a deficit for several months and cap prices at such levels.
  • Extreme blackout of 4MB / d for more than three months would probably bring price over $ 75 / bbl trigger both important responses to supply and demand of shale.

While investment banks such as Goldman Sachs are developing potential price scenarios for crude. Geopolitical risk analysts observe reactions in Washington, Riyadh, Dubai and Tehran. Related: The biggest tech game of the year is taking place under the Wall Street radar

In a series of tweets on Saturday, Foreign Minister Mike Pompeo was quick to point fingers at Iran, saying there was no evidence that the Attack comes from Houthi rebels in Yemen.

Meanwhile, speculation is rife about the exact origin of the attack. According to Reuters, Kuwaiti security experts are investigating the observation of a drone on its territory and are coordinating with Saudi Arabia and other countries after the attacks. Saturday against Saudi oil factories.

In addition, the Iraqi media suggested that the attack on the Saudi oil installations came from Iraq, but Baghdad quickly denied these claims, promising to sue anyone who would use the country to launch the attack. attacks in the region.

As all players in the Persian Gulf are on the alert, it goes without saying that any retaliatory action could raise crude prices to more than $ 80 per barrel.

By the editorial department of Oilprice.com & Zerohedge.com

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