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Oil price explosion – Brent crude jump 20%




Traders have scrambled to calculate what the oil limit will be after Saturday's drone attack on & # 39; the world's most important oil processing plant & # 39 ;. And, moments ago, Brent crude oil opened for trading, exploding nearly 20% higher, its biggest jump in 28 years.

Bloomberg notes that this attack has resulted in the one-worst disruption in oil markets ever, surpassing the loss of Kuwaiti and Iraqi petroleum supplies in August 1990 when Iraq invaded its southern neighbor. It also exceeds the loss of Iranian oil production in 1[ads1]979 during the Islamic Revolution, according to data from the US Department of Energy. "

Further, given the news that the Saudi outbreak may last for months, this may just be a reminder, according to Morningstar Research Director Sandy Fielden," Brent could go for $ 80 tomorrow, while the WTI can go for $ 75 … But that will depend on Aramco's 48 hour update. The supply problem will not be erased right away since the Saudis can still deliver from inventory. "

Of course, if Aramco were to confirm that the power outage will last for several weeks, you can expect the Brent attack to continue to hit $ 80 and continue to move higher.

Finally, here is the Goldman price strategy summary Damien Courvalin, who earlier today released four possible closure scenarios, and the price oil could hit for each:

  • A very short shutdown – for example, a week – would probably drive long-dated prices higher to reflect a rising risk premium , although this did not happen last fall given a proven Permian shale pool, weaker growth prospects and prospects of strong production growth without OPEC in 2020. Such a price impact could probably be $ 3-5 / bbl.
  • A current outage at current levels of two to six weeks would, in addition to this long-term move, see a strengthening of Brent's forward curve (2-mo vs. 3 years Fri mover) of $ 2 to $ 9 / bbl respectively. All in the expected price move would be between $ 5 and $ 14 / bbl, according to the length of the power outage (a six month downtime of 1 mb / d would be equal to a six week one at current levels. current advertising level is announced to last for more than six weeks, we expect Brent prices to increase rapidly above $ 75 / bbl, a level we believe an SPR release is likely to be implemented, large enough to balance such a deficit for several months and cap prices at such levels.
  • An extreme net outbreak of 4 mb / di over three months would probably result in prices above $ 75 / bbl to trigger both large shale supply and demand response.

As investment banks such as Goldman Sachs prepare potential crude oil price scenarios, geopolitical risk analysts look at the reactions in Washington, Riyadh, Dubai and Tehran. [19659010] Related: Largest Technical Games of the Year Fly Under Wall Street's Radar

In a series of tweets on Saturday, Secretary of State Mike Pompeo quickly pointed his finger at Iran, claiming there were no clues for the attack came from Houthi rebels in Yemen.

Meanwhile, there are speculations as to where the attack exactly came from. According to Reuters, security specialists in Kuwaiti are investigating the observation of a drone over its territory and coordinating with Saudi Arabia and other countries following Saturday's attack on Saudi oil facilities.

Alongside this, Iraqi media reports suggested that the attack on Saudi oil facilities came from Iraq, but these allegations were quickly rebuffed by Baghdad, promising to prosecute anyone using the country as a launch pad for attacks in the region.

With all the stakeholders of the Gulf of Persia on the edge, it goes without saying that no retaliation action can send crude prices rising beyond $ 80 a barrel.

By Oilprice.com Editorial Department & Zerohedge.com

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