According to an article published in Platts, all eyes are on oil prices after the attacks on Saudi Arabia’s oil facilities over the weekend.
A decrease in oil output
Saudi Aramco confirmed that the attacks resulted in a temporary loss of 5.7 million barrels per day of oil output, which is close to 60% of their production, putting a dent in global supply.
In the initial reaction to the news, ICE front-month Brent rallied nearly 20% to $71.95 a barrel while NYMEX front-month crude futures surged by as much as 15% to $63.34 per barrel. But prices pulled off their highs as the market digested a tweet from US President Donald Trump saying he has authorized a release of US strategic oil stocks “if needed, in a to-be-determined amount; to keep the oil market well-supplied.”
Focus on geopolitical risk
With geopolitical risk back in focus, S&P Global Platts Analytics estimates oil prices could test $80/b in the coming days.
Zooming in on Asia, major buyers of Saudi crude in the region are unlikely to press the panic button just yet. Crude consumers in both Northeast Asia and India hold adequate oil reserves to cover any shortage of Saudi oil for a few months, and refining companies have a wide range of alternative supply sources.
Still, in oil, China’s expected cutback in crude imports from Venezuela may provide heavy crude suppliers in other regions an opportunity to sell additional cargoes into Asia’s biggest oil consumer over the coming days and weeks.
China’s state-run PetroChina will suspend directly buying crude oil from Venezuela, in accordance with US sanctions on the South American producer, company and industry sources said on the sidelines of the S&P Global Platts Asia Pacific Petroleum Conference in Singapore last week.
Exotic and rare heavy crude brands displayed
To compensate for the potential shortfall in Venezuelan heavy sour crude, a slew of exotic and rare heavy crude brands, including Singma Blend and Malaysian Blend, as well as multiple Canadian grades including Cold Lak and Borealis Heavy Blend, emerged in the latest shopping list of Chinese independent refiners.
In agriculture, the focus remains on China after Beijing reportedly purchased 5 to 10 cargoes of soybeans from the US as a goodwill gesture, following the announcement that the US will be delaying additional tariffs on Chinese goods by two weeks.
Grain and oilseeds futures moved higher, reacting to China’s surprising soybean purchases, along with a bearish supply-demand report from the US Department of Agriculture.
Fixed asset investment data
In the steel markets, China’s National Bureau of Statistics is expected to publish its August fixed asset investment data. This will give the market some indication of the strength of investments in infrastructure, construction, and property markets – which are key drivers of China’s steel demand.
Conclusion
And finally, in LNG, market participants expect the spot market to likely be supported amid uncertainties in the European gas market and supply concerns from the Cameron project in the US. But market fundamentals could also show some resistance due to lackluster buying interest from North Asian buyers, coupled with the supply glut situation.
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Source: Platts
