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UBS on oil after the attack on Saudi production facilities

  
Analysis, Crude
Where we are at is its expected there will be supply disruptions, for how long depends on how quickly the facilities can be repaired, but in the very short term, ie coming days, its expected Saudi can continue supply from stocks. UBS caution:
  • spare capacity is limited
  • However, spare capacity is primarily in the hands of the Saudis UBS assess this at 70% of spare capacity)
  • add that, with 70% of spare capacity, attack is a reminder that large disruptions in Saudi Arabia  mean the ‘reaction function’ of OPEC to cover any supply disruptions is limited
ICYMI, attacks on Saudi oil facilities over the weekend, check the links for the news and what the implications are:

Platts on the oil price impact of the Saudi attack

  
  Analysis
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Via Platts now, in brief from their analysis:
  • Attacks increases concerns on about supply security in the Middle East
  • Oil price risk premium should heighten
  • sudden change in geopolitical risk warrants elimination of the $5-10 a barrel discount on bearish sentiment and also adds potential $5-10 a barrel premium to account for threats to supply, sudden elimination of spare capacity
  • prices are likely to break out of the current $55-65 a barrel options range
  • test high $70s
  • could move higher still if Saudi output is curtailed for a more substantial period
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Note, exports from Saudi are expected to remain around normal levels this week as inventory is drawn upon. Evidence of prolonged curtailment of supply due to damage to production facilities is what to watch for.
ICYMI, oil prices will jump at the open on the attacks over the weekend:
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