Oil rises as Saudi drone attack stokes export concerns
SINGAPORE (Bloomberg) - Oil rose for a second day as a drone attack on a Saudi Arabian oil field revived concerns that the tense Middle East political situation may jeopardize crude exports.
Futures in New York advanced as much as 1.7% to trade above $55/bbl. Yemeni rebels attacked oil and gas facilities at the Shaybah field in the southeast part of the kingdom over the weekend, although there was only a small fire and no disruption to production, Saudi Arabian Oil Co. said in a statement. Prices were also supported as President Donald Trump said the U.S. is talking with China on trade, but suggested he wasn’t ready to sign a deal yet.
Oil rises after Saudi field is hit by drone attack
“Though oil production there has not been affected, this nonetheless puts the spotlight once again on the supply risks in the Middle East,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in a report.
Crude has fallen around 17% from a peak in late April as the U.S.-China trade war intensified, casting a pall over an already-weak outlook for global growth. While a series of attacks on tankers and energy facilities in the Middle East have provided some temporary support to prices, oversupply remains the key concern for the market.
West Texas Intermediate crude for September delivery rose $0.35, or 0.6%, to $55.22/bbl on New York Mercantile Exchange as of 10:50 a.m. in London. The contract, which will expire on Tuesday, advanced 0.7% last week.
Brent for October settlement increased $0.33, or 0.6%, to $58.97/bbl on the ICE Futures Europe Exchange. The global benchmark is trading at a premium of $3.85/bbl to WTI, near the smallest gap since March 2018.
Yemen’s Houthi rebel leader Abdul Malik al-Houthi said the drone strike was meant to deliver an “important message” to the Saudi Arabian-led coalition which has been waging war to unseat the Iran-backed Houthi rebels since they overran the capital about four years ago. The remote Shaybah oilfield produces around 1 MMbpd, just under 10% of Aramco’s total production capacity, including some of the highest-quality crude from the kingdom.
Recent phone calls between U.S. and Chinese trade negotiators had been “positive” and more teleconference meetings are planned over the next week to 10 days, White House economic director Larry Kudlow said Sunday. However, President Trump linked the discussions to demonstrations in Hong Kong, saying for the first time on camera that it would be harder to reach a deal if there’s a violent conclusion to the protests.
“Global risk has some stabilization following the soothing comments on trade-talk developments from the U.S.,” said Jens Naervig Pedersen, a senior analyst at Danske Bank A/S in Copenhagen. “It means that the oil market could have time to pay attention to geopolitical developments.”
Other oil-market news:
- Iran warned the U.S. against targeting a supertanker carrying the Middle East country’s oil as the vessel departed Gibraltar after being seized last month by U.K. forces and held in the British territory.
- Oil explorers picked up drilling activity in U.S. fields for the first time in almost two months, data released Friday by oilfield-services provider Baker Hughes showed.
- Bets on a WTI crude rally jumped 13% in the week ended Aug. 13 -- the day the U.S. president surprised financial markets with a pause in the trade war with China, according to data released Friday.
- The imminent overhaul of global ship-fuel regulations is finally delivering a long-awaited benefit to Asian oil refiners.
