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We just learned how easy it is to upend the oil market — and we’re going to pay for it

We just learned how easy it is to upend the oil market — and we’re going to pay for it thumbnail

The attacks on Saudi Arabia’s oil facilities have done more than knock out some 5 per cent of global crude supplies, they have provided a myriad of lessons for all involved.

There is still a high level of uncertainty as to who, what and how exactly Saturday’s attacks were carried out on Saudi Aramco’s facilities, including the massive crude processing plant at Abqaiq.

But what is certain is that 5.7 million barrels per day (bpd) of production has vanished and geopolitics is back driving the oil market.

This renewed risk was reflected in early price moves on Monday in global benchmark Brent crude futures, which surged as much as 20 per cent in early Asian trade, reaching a peak of US$71.95 a barrel before easing back to around 13 per cent higher at US$68.22.

In recent months the oil market has largely discounted geopolitical risk in the Middle East and chosen to focus on the mounting worries that the U.S.-China trade dispute is tipping the global economy toward recession.

The weekend attacks will have blown that market mindset out of the water, and the discussion will now be just how big should the risk premium be in the oil price.

Much will depend on just how long the Saudi facilities are offline, with early speculation of a period lasting at least several weeks.

This may well tighten the crude market substantially, especially in Asia, which takes about two-thirds of the cargoes from the world’s biggest crude exporter.

Yes, the Saudis can export from storage, the United States and other countries can tap into their strategic reserves, and they can probably meet global requirements this way for several months.

U.S. President Donald Trump authorized the release of crude from the Strategic Petroleum Reserve on Sunday, a move that may have tempered some of the rise in oil prices.

However, the longer the Saudi facilities remain offline, the more nervous refiners will become and the more likely they will be to pay a premium to ensure supplies.

For now, the crude market has been reminded that the whole oil market can be upended very quickly, and that the sector has a series of vulnerabilities that can be relatively easily exploited by those seeking to inflict maximum damage.

Iran Pushback

Another lesson is for Trump and his administration, and that is if you ramp up conflict and tensions with a country such as Iran, you must be prepared for the inevitable counter-punch.

The United States has made it clear that it believes Iran is behind Saturday’s attacks, although it has yet to provide firm evidence of this.

But the chances are that this assessment is mostly correct and Iran, if not directly involved, is likely to have supported those who carried out the attacks.

This of course escalates the simmering tensions in the Gulf region, but it’s worth remembering this was started by Trump’s unilateral decision to withdraw from the multinational agreement with Iran on its nuclear program, despite evidence that Tehran was in compliance with the terms of the deal.

The sanctions on Iranian crude oil may not have taken its exports to zero as Trump wanted, but it certainly has cut them substantially, taking them from around 2.3 million bpd to a figure likely under 1 million bpd.

Would Iran have attacked, or acquiesced to one of its numerous Middle East proxies directly targeting the most vital part of Saudi Arabia’s oil infrastructure if the United States had remained party to the nuclear deal?

The weekend attacks dramatically increase the likelihood of an escalation of the conflict, with Trump already warning in a Tweet that the United States is “locked and loaded” and ready to hit back at what he termed the “culprit.”

The oil market now has to price in the possibility of an expansion of the current tensions in the Gulf into a shooting war in which the belligerents target each other’s crude infrastructure and exports.

There is also the possibility that once the immediate emotions of the event calm down that a more measured response emerges and tensions are de-escalated.

But that will probably require that Trump reverses course, and allows Iran back into international crude markets.

Humiliating climbdowns aren’t exactly what Trump is known for, and he’s probably more likely to try to double down and escalate the conflict, without apparently having a plan for how to resolve his issues with Iran.

The weekend attacks should make it absolutely clear that Iran won’t back down and has the ability to wreak havoc in global oil markets.

What the market probably wants to see is a return to a period of cooler heads in global geopolitics, but the chances are this doesn’t happen, and if it doesn’t, this risk will now have to factored into crude prices.


85 Comments on "We just learned how easy it is to upend the oil market — and we’re going to pay for it"

  1. claes on Tue, 17th Sep 2019 8:17 pm 

    Or maybe the came from up north and just didn’t want to turn LEFT so the ended up in rio rancho instead.

  2. Davy on Tue, 17th Sep 2019 8:19 pm 

    claes, I couldn’t have said it better. Well done, sir.

    “Davy, does it really matter if I’m american or danish. We do share the same destiny. Growing up with Disney, jazz, hippie-culture, Greenpeace, drugs and whatever, we are basically the same. At least 3 persons within a gun shots distance have served in Afghanistan. Really – we are in the same boat.”

  3. Fucktard JuanPaultard on Tue, 17th Sep 2019 8:26 pm 

    Ban the bitch

    Davy said claes, I couldn’t have said it better. Well

  4. Miami Beach Maggot on Tue, 17th Sep 2019 8:29 pm 

    I’m a disgusting person who is now trapped in my own mind. I need help but nobody cares.

  5. claes on Tue, 17th Sep 2019 9:14 pm 

    Miami, Jesus is there for you, That is why he came to earth. Jesus is here, pray for him and he shall release your soul. You shall wander free and find comfort in this world

  6. makati1 on Tue, 17th Sep 2019 9:31 pm 

    claes, you do not have free speech. You can say what you want but don’t try to preach it on the street corner, especially if it is against the local mafia called government.

    I’m NOT afraid of China as I am not brainwashed like most Westerners. I am also in favor of Russia’s rise. No phobia there either. I think it is called an open mind? Something rare in the West and especially my native country, Amerika.

    I am more concerned that the US will start a war in Asia than I am of anything China may do. China doesn’t have 800 bases around the world to promote war. It does not sail warships between Florida and the Bahamas or Cuba claiming that it is “protecting freedom of the seas”.

    Europe is moving East to China and away from the US. That is a good thing for you, I think. The future is in the East.

  7. Davy on Tue, 17th Sep 2019 9:40 pm 

    “ we are in the same boat.”
    Claes, the American boat is a majestic naval destroyer with precision guided munitions and the gratest weapons of mass destruction in the entire universe.The Danish boat is a leaky widdle dingy. Not the same boat at all.


  8. Bloomer on Tue, 17th Sep 2019 9:47 pm 

    Yeah I can see the Iranians giving the Yemen folks some exploding drones and telling them remember they didn’t from us.

    Bottom line we are all vulnerable. Our fate lies in the hands of the oligarchs and banksters. Working 2 jobs to keep our head above water or die on a city street is what we in North America call freedom.

    Does the average smuck even give a crap if the whole oil economy implodes.With the exception of some Northern Alberta rig hand, I say no.

  9. superetard Davy said this obv. on Tue, 17th Sep 2019 9:49 pm 

    I’m a disgusting person who is now trapped in my own mind. I need help but nobody cares.

  10. claes on Tue, 17th Sep 2019 9:49 pm 

    The only government that is particularly against religion is the Chinese CCP. Just so that you know it. Read this:

    “Miami” called for help, and I gave him/she what I could offer.
    Your communistic mind doesn’t seem to care much for individuals.

  11. MODS supremacist muzzie jerk on Tue, 17th Sep 2019 9:55 pm 

    The idea that America is tarded is wrong. (((Supertard) )) gave us the innernet that enabled women to take charge. The old intelligence is losing badly. This explains the call for salvation in the form of big grab. Snowden is supertard but he is currently in tarded settings. He will tard over the long term

  12. claes on Tue, 17th Sep 2019 9:56 pm 

    I really didn’t want to get into the DAVY-stuff. But anyway, it seemed like a person in deep distress. Sorry for that – won’t happen again

  13. makati1 on Tue, 17th Sep 2019 10:00 pm 

    claes, I am against religion also. All that god stuff is bullshit, designed to control the masses and skim for the priests. Nothing more. Nothing less. I live a free life, not like some who want a daddy in the sky to beg from or blame stupid mistakes on.

    I know that when I pass, it is nothing, zero, lights out. Therefore, I live my life as the only one I will get and the Golden Rule is my bible. I was raised Protestant, converted to Mormonism and then ‘saw the light’ and became an atheist. Freedom most will never realize.

  14. MODS supremacist muzzie jerk on Tue, 17th Sep 2019 10:01 pm 

    When supertard SAWS pbuh brings his peace club and spank hard you notice haters responded with smearing him

    Being a muzzie lover didn’t help dodging their wrath

    ‘Lo I’m a supremacist muzzie animal Allah created. They are worst of creatures

  15. claes on Tue, 17th Sep 2019 10:16 pm 

    Mak, since WW2, who have started a war against china ? Nobody.
    But China has started wars against Vietnam, Russia, South Korea and India, not to speak of their ongoing war against Taiwan.
    The peace loving people of China is anything but warlike.

  16. Bloomer on Tue, 17th Sep 2019 10:19 pm 

    I am a nothingist myself Makati. Give me a comfortable pair of shoes and a warm place to go to the bathroom and all is good in my world. As far as the human race goes survival is not mandatory.

  17. claes on Tue, 17th Sep 2019 10:31 pm 

    Mak, religion migth have an other more profane purpose, namely to help people that for some reason have deep existential problems, Problems that we normal people can’t really solve.
    You can praise your self lucky that you haven’t had such a deep crisis, but some people have them. And thats where the basic religion get into the picture. And even if it is fake it still helps a lot of souls in deep perrils and calms their minds.

  18. Davy on Tue, 17th Sep 2019 10:35 pm 

    I am spending less time on this lame unmoderated forum to concentrate on my own blog. I do want to thank all those who have attacked me with giving me material for growth. I lurned so much here. Like how insane it is for people to use the ‘F’, ‘C’, ‘P’, an ‘B’ wurds on public Internet forums.

    Thanks everyone!

  19. MODS supremacist muzzie jerk on Tue, 17th Sep 2019 11:11 pm 

    i don’t spend time here. i spend time with my goat. thanks for attacking me which gives material for growth, thanks.

    “lo i’m allah supremacist animal, the others are worse of creatures”

  20. makati1 on Tue, 17th Sep 2019 11:14 pm 

    claes, references for your assertions please.

    Vietnam – Americans started it. Gulf of Tonkin

    Korea – Was started by the N. Koreans and backed by Russia, not China. It was not until late in the war when the US threatened China that it got involved and then the US lost.

    Russia – “The conflict resulted in a ceasefire, with a return to the status quo. Critics point out that the Chinese attack on Zhenbao was to deter any potential future Soviet invasions; that by killing some Soviets, China demonstrated that it could not be ‘bullied’; and that Mao wanted to teach them ‘a bitter lesson’.” WIKI

    India – Another border disagreement. Nothing more or less.

    As for Taiwan, Taiwan is China. Only brainwashed westerners think otherwise. Ditto for Honk Kong. Only a matter of time.

    “US Has Killed More Than 20 Million People in 37 “Victim Nations” Since World War II”

    The US is the warmongering country and has killed over 20 million in many countries since WW2. The European lap dogs have their head so far up the US’ ass that the haven’t seen sunshine in decade.

  21. makati1 on Tue, 17th Sep 2019 11:28 pm 

    There are no “souls” claes, only bodies with minds. Psychiatrists are the help there, not witch doctors with titles.

    Religions cause more problems than it helps. Wars being the main one(ME). Protestant/Jew/Muslim all worship the same sky god. How many people in those religious tribes know that? Few, I’ll bet. Why? Not good for the serfs to question “god”.

    How many civilizations were destroyed in the name of “religion”? Hundreds if not thousands.

    Supporting religion is like supporting the US in its plundering and murder. Its ALL about power and control. Scare the dumb serf to death with the threat of hell and he will give you a percentage of his labors so you can live the easy life, same as today.

    The Mormon Church wants 10% of ALL of your income, plus servitude for life, so you can go to Heaven. But then, they offer you a world where you too can be a god, if you pay the price here. What do they do with the money? Build malls, office buildings, own ranches, businesses, etc. Totally commercial, tax free. God? LMAO

  22. DerHundistLos on Wed, 18th Sep 2019 2:45 am 

    The Lutheran and Catholic churches (one side Lutheran and other Catholic) was of great emotional assistance to my family after the war.

  23. DerHundistLos on Wed, 18th Sep 2019 2:48 am 


    No on Vietnam. The people of the south wanted nothing to do with the north. When there was no popular uprising in the south, that’s when infiltrators and NVA units were sent in. Further, minority groups like the Hmong hated the communists due to the atrocities that were committed- that is until we armed them and they could protect themselves. That is when the tables were turned and the NVA became the hunted.

  24. makati1 on Wed, 18th Sep 2019 3:00 am 

    Der, but…the US got its ass kicked anyway and almost destroyed a great country “to save it”. Sound familiar?

    I was in my 20s then. Too smart to be ‘agent oranged’ by my own government in the jungles of Vietnam. The National Guard was much safer and a more intelligent choice.

    Obviously you have absorbed too much USMSM koolaid. The US has no business being there. A country half way round the world. Just as it has no business in the ME or anywhere else outside the 50 states. The terrorist US needs to be put down and soon. Tomorrow would be fine with me.

  25. makati1 on Wed, 18th Sep 2019 3:31 am 

    Der, anyone who needs a religious crutch, should grow up and accept reality for what it is, a bitch. If you cannot handle it, too bad.

    The community should do what churches do, take care of their own without religious chains. But, those days are gone and religions are dying as intelligence and education create too many questions religions have no answer for.

    The Romans kept detailed tax records of ALL their citizens but, somehow, there is no sign of a certain manger born kid. Christ is probably the biggest, most outrageous lie ever promoted by the churches.

    All of religion is based on “faith’. Is that why there are over 4,200 religions today? Everyone wants a piece of the action. LMAO!

  26. DerHundistLos on Wed, 18th Sep 2019 7:30 am 

    “Too much koolaid.” What the fuck do you know having been stateside during the war. While you were pulling on your pud, I was in the service. You think anyone who disagrees with you is totally ignorant. As a result, you end up looking foolish.

  27. Robert Inget on Wed, 18th Sep 2019 9:38 am 

    Demand lower.

    EIA Weekly Petroleum Report
    Summary of Weekly Petroleum Data for the week ending September 13, 2019

    U.S. crude oil refinery inputs averaged 16.7 million barrels per day during the week ending September 13, 2019, which was 788,000 barrels per day less than the previous week’s average. Refineries operated at 91.2% of their operable capacity last week. Gasoline production decreased last week, averaging 9.5 million barrels per day. Distillate fuel production decreased last week, averaging 5.1 million barrels per day.

    U.S. crude oil imports averaged 7.1 million barrels per day last week, up by 326,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.7 million barrels per day, 13.7% less than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 501,000 barrels per day, and distillate fuel imports averaged 142,000 barrels per day.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.1 million barrels from the previous week. At 417.1 million barrels, U.S. crude oil inventories are about 2% below the five year average for this time of year. Total motor gasoline inventories increased by 0.8 million barrels last week and are about 4% above the five year average for this time of year. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased by 0.4 million barrels last week and are about 6% below the five year average for this time of year. Propane/propylene inventories increased by 2.9 million barrels last week and are about 16% above the five year average for this time of year. Total commercial petroleum inventories increased last week by 0.9 million barrels last week.

    Total products supplied over the last four-week period averaged 21.4 million barrels per day, virtually unchanged from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 9.5 million barrels per day, down by 1.8% from the same period last year. Distillate fuel product supplied averaged 4.0 million barrels per day over the past four weeks, down by 2.0% from the same period last year. Jet fuel product supplied was down 1.4% compared with the same four-week period last year.

  28. Robert Inget on Wed, 18th Sep 2019 10:54 am 

    Due to recent events today’s repore may put oil prices back to last Friday levels. ($58.00)
    As it happens one of America’s major refineries was down last week and this.
    (swells crude storage) See what Twitter thinks*

    Trump may not know this but we have been drawing from SPR all year. IMO, to hold pump prices lower on orders from the W.H.
    Along comes a quite serious attack on Saudi Arabia. Maybe trump believes SPR is bottomless.
    It ain’t. I’ll be he hasn’t the faintest idea how much gasoline is at the pump.

    Speaking of reserves.**
    Since July, Saudi STORAGE has been dropping
    every month. IOW’s trouble with production, months prior to the Iran attack.
    Last week-end’s events exposed this serious
    drop in Saudi reserves.

    Bottom line. As predicted, we, the US will be seeing far higher pump prices rat cheer in six to eight weeks.

    China is more dependent on KSA than USA.
    Iran is seeking to take that Chinese market from KSA. Iran has already made serious inroads into the Chinese markets. Putting KSA on hold for a few months, should make China utterly dependent
    on Iran. The real reason for attacking ?

    Also, but not widely acknowledged, Iran, Russia and China are moving to destroy USD confidence.
    Oil shortages for industry is deadly. Major unemployment always follows spikes in oil prices.

    Yesterday, the Fed needed to come up with (printed) tens of Billions to keep overnight financial markets afloat. I believe this was a probe or test.****

    Trump has no ideas. He seems utterly dependent
    on orders from Putin. If that back-channel gets blocked, Trump is helpless.
    That’s what a person gets cheating their way through Wharton, then, bragging he was top of his class.


    ** Down for seasonal up-keep and changeover
    to winter blends. Normal.

    *** Nuttall tweeted that Saudi inventory that can be shipped is basically just 60 million barrels… They had better get production up soon!
    (the world burns 100 million+ daily)
    Upshot: 2.5% supply off market NOW.
    5% by December. In a ‘just-in-time delivery’ that
    means economy killer high oil prices.


    Trump’s ‘War on Trade’ disrupted entire world
    markets. Always follow the money.
    Putin always stands to gain.
    Instead of limiting sanctions Putin intends to make sanctions moot by destroying USD confidence.

  29. Davy on Wed, 18th Sep 2019 11:09 am 

    Bob, you really need to have one of your kids reality test your comments. They are getting more far fetched by the day

  30. makati1 on Wed, 18th Sep 2019 5:59 pm 

    Der, just because your were too stupid to avoid Nam does not make you an expert. I didn’t suck up the propaganda you obviously did. Defending your stupid mistake does not make you correct.

    The last thing we should be thanking our stupid armed forces for is being stupid and serving the Police State, killing babys in foreign lands that have no means to hurt the 50 states of Amerika. You were/are a sucker for the MIC billionaires.

  31. Fucktard JuanPaultard on Wed, 18th Sep 2019 10:07 pm 

    Ban the stupid dumbfuck cunt

    Davy said, Bob, you really need to have one of your kids reality test your comments. They are getting more far fetched by the day..

  32. MODS supremacist muzzie jerk on Wed, 18th Sep 2019 11:34 pm 

    What do muzzies doing on this forum
    They should be busy with zebiba
    Muzzies sabotaged airline and got loved 100x in the form of union dispute
    It wasn’t-supertard Spencer SAWS pbuh report a jihad

  33. MODS supremacist muzzie jerk on Wed, 18th Sep 2019 11:35 pm 

    Muzzies should get off forum and report
    To amputation center

  34. I AM THE MOB on Thu, 19th Sep 2019 6:14 pm 

    Fastest-growing UK terror threat ‘from far-right’

  35. Cloggie on Thu, 19th Sep 2019 9:56 pm 

    People generally don’t like it of their country is stolen from them. The right is rising everywhere in response to “globalism”.

    I wouldn’t sell George Soros a life insurance package.

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