S&P Global Platts sees Saudi oil strikes driving up risk premium in crude market


(Reuters) – Attacks on Saudi oil plants have boosted concerns about supply security in the Middle East and should raise the risk premium in the global crude market, shifting focus from a gloomy backdrop, S&P Global Platts said on Sunday.

“The sudden change in geopolitical risk warrants not only an elimination of the $5-10 a barrel discount on bearish sentiment, but adds a potential $5-10 a barrel premium to account for now-undeniably high Middle Eastern dangers to supply and the sudden elimination of spare capacity,” it said in a note.

“As such prices are likely to break out of the current $55-65 a barrel options range, to test the high $70s as currently supported by .”

Prices could move higher still if Saudi output is curtailed for a more substantial period, the note’s author Chris Midgley, global head of analytics at S&P Global Platts, wrote. However, that is not its current assumption.

Article continues below Advertisement...

An industry source briefed on the developments told Reuters on Sunday that ’s oil exports will continue as normal this week as the kingdom taps into stocks from its large storage facilities.

Platts said, however, that “any evidence of prolonged disruption of production would heavily impact spare capacity and the ability of the to use Strategic Reserves to shore up the market”.

Yemen’s Houthi group claimed responsibility for Saturday’s attacks that knocked out more than half of Saudi oil output, or more than 5% of global supply. U.S. Secretary of State Mike Pompeo said the assault was the work of , a Houthi ally. rejected the accusations.

State oil giant Saudi Aramco said the attack cut output by 5.7 million barrels per day. Aramco gave no timeline for output resumption. A source close to the matter told Reuters the return to full oil capacity could take “weeks, not days”.

The Wall Street Journal reported on Sunday that Saudi Arabia is aiming to restore a third of lost oil output by Monday.

Platts said that higher will add to the headwinds faced by the global economy.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the , it is one of the riskiest investment forms possible.

Source: Investing.com