Oil slammed by biggest price jump ever — Trump eyes reserves

(Official Whte House Photo by Joyce N. Boghosian)

President Donald Trump countered the sudden disruption to oil markets by assuring there would be “plenty” available and authorizing the release of oil from America’s emergency reserves.

Monday’s markets were rattled by the drone strikes on key Saudi Arabian oil centers which affected about half of the oil capacity of the Kingdom of Saudi Arabia. The president tweeted that the United States is “locked and loaded” and ready to respond to the attack while announcing the move to release oil from the U.S. Strategic Petroleum Reserve.

The reserves, located in Texas and Louisiana and managed by the Department of Energy, have only been tapped on three occasions with the most recent under the Obama administration amid unrest in Libya.

“PLENTY OF OIL!” Trump added in a follow-up tweet to assuage any concerns about shortages as the attack affected more than 5 percent of the daily crude oil production of the world, cutting the 5.7 million barrels per day output from the Kingdom of Saudi Arabia.

“We have never seen a supply disruption and price response like this in the oil market,” Saul Kavonic, an energy analyst told Newsmax as oil surged to over $71 a barrel at one point in the largest one-day increase.

Global stock markets reacted to the price jump as in the U.S., Dow (INDU) futures were nearly 100 points lower, according to CNN:

European markets were also in the red, while energy stocks, including BP (BP) and Royal Dutch Shell (RDSA), were the best performers in London’s FTSE 100 (UKX).Asian markets finished mostly lower, with Hong Kong’s Hang Seng closing down 0.8%. CNOOC, China’s biggest offshore oil producer, spiked 8.7% in Hong Kong, making it the best performer on the Hang Seng. PetroChina, another Hang Seng (HSI) component and Asia’s largest oil and gas producer, rose 7.4%.

 

“This is a big deal,” Tom Kloza, chief oil analyst for the Oil Price Information Service, said. “It is the biggest shock to the oil markets since [Hurricane] Katrina. And like Katrina it will likely haunt us for months, at least weeks.”

Citigroup Inc.’s global head of commodities research, Ed Morse, wrote: “No matter whether it takes Saudi Arabia five days or a lot longer to get oil back into production, there is but one rational takeaway from this weekend’s drone attacks on the kingdom’s infrastructure — that infrastructure is highly vulnerable to attack, and the market has been persistently mispricing oil.”

The president tweeted Sunday that there is “reason to believe that we know” who was behind Saturday’s strikes and “depending on verification,” waiting on Saudi Arabia for more information.

Yemen’s rebel Houthi group claimed responsibility for drone attacks amid a backdrop of escalating tensions between the U.S. and Iran which, though not directly blamed for the attack by the Trump administration, is believed to be backing the group.

Secretary of State Mike Pompeo noted there is “no evidence the attacks came from Yemen” and Iran denied the accusations.

Frieda Powers

Senior Staff Writer
[email protected]

Originally from New York, Powers graduated from New York University and eventually made her way to sunny South Florida where she has been writing for the BizPacReview team since 2015.
Frieda Powers

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