The biggest uncertainty is whether the conflict in the Gulf will escalate and remove millions of barrels of oil from the market
The price of Brent oil, which had briefly jumped as much as 20% after the attack, slumped back to $64, just $1 above its level a week earlier. Aramco has so far maintained exports by drawing down supplies, but its stocks were already at a 12-year low. Much depends on whether it can meet its own timeline for resuming production. Yet its assurances were greeted sceptically by some industry veterans.
In the past year oil prices have jumped and slid, alternately pushed up by concerns that American sanctions on Iran and Venezuela would curb supply and depressed by fears of slowing economic growth. In December the Organisation of Petroleum Exporting Countries , Russia and other oil producers agreed to reduce output by 1.2m barrels a day. Saudi Arabia has cut more than it promised to, keeping oil prices from sinking as far as they might have otherwise.
Faced with such challenges, Saudi Arabia has shaken up its oil hierarchy. A new oil minister, Prince Abdulaziz bin Salman, and a new chairman of Aramco, Yasir Othman Al-Rumayyan, assumed their posts in the past month. But stabilising oil prices and speeding Aramco’s, which has tantalised investors since it was first announced in 2016.
Oil traders are now looking for signs that Aramco’s customers are seeking oil elsewhere, says Michael Tran ofCapital Markets, a bank. The biggest uncertainty is whether the conflict in the Gulf will escalate and remove millions of barrels of Saudi production from the market. Were that to happen it is not immediately clear what would replace it.
Shale has made America the world’s biggest oil producer, but Donald Trump cannot ramp production up and down because he does not control shale companies. If oil prices rise many shale firms would probably return cash to shareholders rather than boost output, says Chris Midgley ofAll this points to uncomfortable realities for the world’s two energy superpowers.
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