NEW YORK (Reuters) – Oil ended nearly 15% higher on Monday, with Brent logging its biggest jump in over 30 years amid record trading volumes, after an attack on Saudi Arabian crude facilities cut the kingdom’s production in half and fanned fears of retaliation in the Middle East.
The attack heightened uncertainty in a market that had become relatively subdued in recent months and now faces the loss of crude from Saudi Arabia, traditionally the world’s supplier of last resort. A gauge of oil-market volatility hit its highest level since December of last year, and trading activity showed investors expect higher prices in coming months. “The attack on Saudi oil infrastructure came as a shock and a surprise,” said Tony Headrick, an energy market analyst at St. Paul, Minnesota, commodity brokerage CHS Hedging LLC. “I think the tables abruptly shifted in the way of the supply outlook and caught many who were short off-guard.” Two sources briefed on Aramco’s operations said a full return to normal production “may take months.” “I don’t think there really is enough to offset what is going to be offline here for a period of time, and you don’t even know the quantity of time,” said Joe McMonigle, energy analyst at Hedgeye Research.
DUBAI (Reuters) – Saudi Aramco’s full return to normal oil production volumes “may take months”, two sources briefed on the company’s operations said on Monday, after attacks on Saudi oil plants knocked out more than half of the country’s output. “It is still bad,” one source said.
On Sunday, an industry source briefed on the developments told Reuters that Saudi Arabia’s oil exports will continue as normal this week as the kingdom taps into stocks from its large storage facilities, but that Aramco may have to cut exports later if the outage in output continued for long.
A major Saudi Arabian oil field was attacked on Saturday, and it’s safe to say that no one saw this coming. Nick Note: BULLSHIT! I saw this coming and told you they would knock out Saudi production… Score a BINGO and $250 oil here we come. Oil futures aren’t trading just yet, but the Saudi Arabian stock market is open for trading on Sundays and the Tadawul All Share Index is down more than 1%. Expect a big jump in oil prices.
Here’s what we know. On Saturday, Saudi Arabia’s Abqaiq facility and the Khurais oil field were attacked. The oil field produces about 1.5 million barrels of crude a day, while the facility processes more than 7 million barrels, according to RBC’s Helima Croft. She estimates that some 5 million barrels of oil exports won’t be happening in the near term, though Saudi officials say that exports will resume in a few daws. Either way it’s a big deal. “Saturday’s twin drone attacks mark the most dramatic escalation in the ongoing Iran standoff and have put the region more squarely on the path to a military conflict,” Croft writes. Expect a big spike in oil prices when trading begins. Oil prices have been stuck in a range recently, with WTI Crude, the U.S. benchmark, trading between $50 and $60. There’s a good chance that the trading range will be broken given the sheer scale of the attack. Nick Bit: told you so… who want to be a millionaire… If you did not listen to me they made you a asshole. You stuck to your guns… your hire a expert and get rich. And if you listen to lizards you go broke and go poor! I did not do it! that’s how the world works!!
A coordinated drone strike hit at the heart of Saudi oil production on Saturday, sparking an enormous blaze and forcing the kingdom to shut down about half of its crude output, according to people familiar with matter. Iran-allied Houthi rebels in neighboring Yemen claimed responsibility for what would be one of their largest-ever attacks inside the kingdom.
The strikes on facilities in Saudi Arabia’s Eastern Province mark the latest in a series of attacks on the country’s petroleum assets in recent months, as tensions rise among Iran and its proxies like the Houthis, and the U.S. and partners like Saudi Arabia. The Houthis have also claimed credit for drone attacks on Saudi pipelines, tankers and other infrastructure during a four-year war. This attack appeared to be the most effective, starting large fires at Hijra Khurais, one of Saudi Arabia’s largest oil fields, and at Abqaiq, the world’s biggest crude stabilization facility. Khurais produces 1.5 million barrels a day while Abqaiq helps produce up to 7 million barrels a day. A Houthi spokesman said the attack involved 10 drones. Published images of the fire at the Abqaiq facility showed what appeared to be a huge blaze along with plumes of smoke. “We promise the Saudi regime that our future operations will expand and be more painful as long as its aggression and siege continue,” the spokesman said. The Saudi interior ministry said the fires were under control. Saudi Aramco, the national oil company, held an emergency board meeting on Saturday to manage the unfolding crisis, the people said.As the world’s biggest exporter of oil, Saudi officials are discussing drawing down their oil stocks to sell to foreign customers to ensure that world oil supplies aren’t disrupted, the people familiar with the matter said. The Saudi government didn’t say who was behind the attack. There were no immediate reports of casualties. The Houthis took control of Yemen’s capital, San’a, in 2014 during a civil war. Since then, a Saudi-led coalition has fought a war to unseat the Houthis and reinstate a government supported by Saudi Arabia, the United Arab Emirates and other regional powers. Saudi Arabia and the U.S. say the Houthis are financed and armed by Iran, a charge that Tehran denies. Armed Drones Are a Growing Threat From Rebels in Yemen Yemen’s Houthi rebels are using armed drones with startling success. WSJ reporters describe their increasing sophistication and recent confirmed attacks. Illustration: Laura Kammermann Disruptions in Saudi oil production could have ripple effects through the global economy, as the kingdom exports more crude petroleum than any other country. Saudi officials have called for the international community to help protect its oil infrastructure.
Aramco is “ready” for the giant stock market debut but the timing is a “government decision”, Amin Nasser told reporters on the sidelines of the World Energy Congress. “One of the primary listings is going to be local but we are also ready for listing outside.” Nasser’s remark came after the Wall Street Journal reported last week that Aramco was considering a domestic debut and a subsequent international listing – possibly in Tokyo. Aramco has said it plans to float around five percent of the state-owned company in 2020 or 2021 in what could potentially be the world’s biggest stock sale. It aims to raise up to $100 billion based on a $2 trillion valuation of the company, but investors have long debated whether Aramco is really worth that much.
Saudi Aramco gives nine banks top roles on world’s biggest IPO:sources
The kingdom plans to list 1% of the state oil giant – the world’s largest oil company – on the Riyadh stock exchange before the end of this year and another 1% in 2020, sources told Reuters this week, as initial steps ahead of a public sale of around 5% of Aramco.
Aramco has selected JPMorgan Chase & Co (JPM.N), Morgan Stanley (MS.N) and Saudi Arabia’s National Commercial Bank (1180.SE), which were previously working on the share sale before it was paused last year, the sources said, declining to be identified due to commercial sensitivities. It has also chosen Bank of America Merrill Lynch (BAC.N), Goldman Sachs Group Inc (GS.N), Credit Suisse Group AG (CSGN.S), Citigroup Inc (C.N), HSBC Holdings PLC (HSBA.L) and Saudi Arabia’s Samba Financial Group (1090.SE), they added. To secure the lead role on the IPO, JPMorgan’s efforts were led by senior bankers in New York, London and Saudi Arabia who had long-standing relationships in Saudi Arabia, rather than Chief Executive Jamie Dimon, according to a person familiar with the matter. Aramco, JPMorgan, Bank of America, Citi, Credit Suisse, Goldman Sachs and HSBC declined to comment. The remaining banks did not immediately respond to requests for comment The IPO plan has rapidly gained momentum in recent days with the appointment of the head of the kingdom’s PIF sovereign wealth fund, Yasser al-Rumayyan, as Aramco’s new chairman. Rumayyan, a close ally of Prince Mohammed, took over from former energy minister Khalid al-Falih in a move to separate Aramco from the ministry, a step Saudi officials have said was important to pave the way for the IPO. Bankers have been courting Saudi Arabia to secure roles in the transaction, which has faced repeated delays, but which officials have said will happen by 2020-2021. Aramco’s chief executive, Amin Nasser, said this week that the domestic IPO would be the “primary” listing but that the company was also ready for an international share sale. He said the final decision on venue and timing rested with the government. Based on the indicated $2 trillion valuation that Saudi Aramco had hoped to achieve, a 1% float would be worth $20 billion, a huge milestone for the local stock market.