Closed Oil rallies 10%; Saudi production may take months to recover — as it happened

Saudi Aramco Impact of Attacks

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Welcome to the FT’s latest live blog.

The price of oil rocketed overnight after an attack on Saudi Arabia’s oil infrastructure hit more than half of the country’s production.

Brent crude opened up more than 20 per cent ­- its biggest percentage jump since Saddam Hussein invaded Kuwait in 1990 – on fears that the Kingdom’s oil output will be well below maximum capacity for weeks.

We’ll be following developments today live in this blog, with the latest insight from the FT’s energy team and regional correspondents. If you are just catching up with what has been happening, here’s some reading to get you started.

Oil prices soar after attacks halve Saudi output

Saudi Arabia faces weeks without full oil production after attack

What you need to know

So what are the key facts?

- An attack on Saturday set two major Saudi Arabian oil facilities – Abqaiq, a vital crude processing centre, and the Khurais oilfield – ablaze, hitting more than half of the Kingdom’s crude production.

- The US has said the attack was orchestrated by Iran and Iran-backed Houthi militias in Yemen have claimed responsibility.

- Yesterday it emerged that Saudi Arabia is now looking at weeks without full crude and gas production capacity.

- The market has yet to receive clarity as to how long it will take the Kingdom to restore output towards the 9.8m barrel a day level of before the attack.

- As a result oil rocketed upwards on Monday’s open, with Brent gaining as much as 20 per cent to above $71.00 a barrel – the largest move in percentage terms since Saddam Hussein invaded Kuwait in 1990.

- It has since pared some of those advances to trade up 10 per cent at $66.31 a barrel.

Barclays: Attack raises ‘supply-side tail risks’

The attack on one of Saudi Arabia’s key oil facilities will prompt market participants to re-price the risk of unexpected shocks to world energy supplies, Barclays has said.

The UK-based investment bank reckons that while “exports will likely not be impacted significantly” by the attack over the weekend, there will be a material shift in the way markets perceive tail risks, or low probability, high impact events.

Barclays oil analyst Amarpreet Singh notes:

Market expectations of supply-side tail risks will likely reset. At a time when oil markets have been in the shadows of a weak global macroeconomic backdrop, the attack on critical Saudi oil infrastructure calls into question the reliability of supplies from not just one of the largest net exporters of crude oil and petroleum products but also the country that holds most of the world’s spare production capacity.

Total OPEC spare production capacity stood at 2.2m barrels per day in Q2 19, according to the IEA, almost all of which was likely held by Saudi Arabia, by our estimates. This, coupled with a heightened geopolitical risk premium as investors assess the probability of a re-negotiated Iran nuclear deal, will likely provide a more lasting boost to oil prices in our view .

ING: Attack underlines vulnerability of Saudi infrastructure

Analysts at Dutch bank ING point out that what happened this weekend demonstrates that the Kingdom is susceptible to severe disruption from direct attacks on its facilities.

Warren Patterson, head of commodities strategy at ING, notes:

Whilst many have been worried about disruptions to oil flows through the Strait of Hormuz, this latest incident does suggest that such attacks can prove even more disruptive.

Furthermore, is the uncertainty of how the Saudis will respond to the attack, but what is certain is that the market needs to price in a risk premium for the simmering tension in the region.

Mr Patterson adds that “any indication or confirmation” from the Saudis of a prolonged outage, would see Brent trading back above $70 a barrel in the near term.

Turkish lira hit by jump in oil prices

The FT’s Laura Pitel reports:

The Turkish lira was down almost 1 per cent against the dollar after local markets opened on Monday. Turkey is heavily reliant on energy imports, meeting more than 80 per cent of its total energy needs with purchases from abroad, according to the OECD. Thirty per cent of its total primary energy supply comes from oil.

‘God’ speaks

Andy Hall – arguably the most successful oil trader of his generation – has given his insights on the weekend’s developments exclusively to the FT.

Over a near 45-year oil trading career, Mr Hall gained a reputation for landing on the right side of some of the biggest bets in the market’s history.

He earned the nickname “God” in 1990 when he made an incredibly risky bet on the price of oil ahead of Saddam Hussein’s invasion of Kuwait – the last time crude spiked as much as it did on today’s open.

Mr Hall shut down Astenbeck, the world’s largest energy hedge fund, in 2017 but remains a keen follower of the market.

Here is what he had to say this morning to the FT’s energy editor David Sheppard:

Obviously this is a huge development. The loss of production is comparable with that during Saddam’s invasion of Kuwait. An SPR release in the US isn’t going to help offset it much as US crude export capacity is maxed out and opportunities for import substitution are very limited.

Ironically, the Saudis have run down their own excess crude/strategic inventories in recent years and these now appear to be at multi-year lows if published data are to be believed.

OPEC “spare capacity” consists primarily of Iranian production constrained by US sanctions. It seems unlikely they will be lifted in the current circumstances! A meaningful production response elsewhere would take years even for US shale which has anyway seen it’s production growth start to roll over and would quickly encounter infrastructure and other constraints.

This attack underscores the vulnerability of oil production facilities in the Middle East in particular and the world in general. All the tens of billions of dollars the Saudis have spent on weapons could not protect them from a dozen or so low tech drones. Asymmetrical warfare indeed!

It would seem the oil market needs to not only price in the current supply loss but also a higher risk premium for the future. On the other hand, the apparent fragility of the global economy will now be further tested by an oil price spike.

Buckle up!

UBS: Bad news for Asian equities

Hudson Lockett, the FT’s Asia capital markets correspondent, reports from Hong Kong:

Niall MacLeod, UBS investment research strategist for Asia Pacific, said that the disruption was likely negative for Asian equities because Monday’s price moves were not driven by demand.

Oil price spikes driven by demand have generally been positive for equities in [Asia Pacific]. By contrast oil price spikes on supply shortages are usually bad.

Past correlation of weekly supply-driven moves in oil prices and equities suggests a 5 per cent, 10 per cent and 25 per cent jump in oil would hit Asia ex-Japan equities by 1.2 per cent, 2.4 per cent and 5.9 per cent, respectively.

At the macro level, there are four drivers for equities:

1. The energy impact on trade balances;

2. The pass-through to inflation and degree to which this could impact monetary policy;

3. Past correlations of oil to the exchange rate;

4. The size of the oil sector in an individual equity market.

European open: Energy stocks jump, airlines hit

Shares in energy companies are leading the way higher, while airlines are the biggest laggards, as European equities trading gets underway.

Here’s a rundown of some of the biggest movers around 10 minutes into trading:


-Wood +5%
-Tenaris +4.5%
-BP +3.8%
-Royal Dutch Shell +3%
-Total +2.9%


-Ryanair -4.5%
-Air France KLM -4.2%
-EasyJet -3.3%
-Airbus -3.2%
-Deutsche Lufthansa -2.9%

Russia: No need for urgent measures

Henry Foy, the FT’s Moscow bureau chief, reports:

Russia does not see the need for urgent measures in response to the attack, the country’s energy minister said, adding that he would speak to his Saudi counterpart later on Monday.

“There is no need to undertake any extra urgent [steps],” Alexander Novak said. “At present, as we understand it, there are enough commercial reserves in the world to ensure that in the medium term the shortage of oil that we see is covered by supplies from commercial reserves.”

Russia and Saudi Arabia have worked in tandem in recent years to pare back oil production as part of a deal with the wider OPEC cartel to prop up prices.

Mr Novak said that the so-called OPEC+ deal was still in force and would be adhered to, unless its members agreed to meet and make adjustments.

“Nobody changed the parameters of the deal… everyone should fulfill their obligations. If there are really any needs and force majeure – we can always get together and discuss some other parameters,” Mr Novak said, in remarks carried by Russian news agencies.

“Everything depends on the speediest assessment of the consequences, which is carried out by Saudi colleagues, and after that it will be possible to understand the scale of the impact on production and supply.”

Saudi Aramco’s debt under pressure

Bonds in Saudi Arabia’s state energy company Aramco have sustained a modest decline in price after this weekend’s attacks.

Saudi Aramco’s dollar-denominated debt maturing in 2049 has fallen more than 2 cents in price to 105.8 cents on the dollar, according to Refinitiv data. That has pushed the yield up 0.11 percentage points to 4.03 per cent.

Brent up 9% in mid-morning dealings in Europe

Oil prices are up markedly as more trading volume comes in during the European morning, although the rise has cooled substantially from the knee-jerk reaction overnight.

Brent crude, the international benchmark, is currently up 9.2 per cent at $65.72 a barrel. It had been up as much as 20 per cent, at nearly $72 a barrel, earlier in the trading session. West Texas Intermediate, the US marker, is up 7.7 per cent at $59.07 a barrel, also off its highs above $63.

Liquidity is typically light when trading begins in the New York evening on Sunday, something that frequently exacerbates the magnitude of price swings.

Opec: ‘We are not hitting the panic button’

Opec secretary general Mohammad Barkindo has sought to calm markets this morning, praising the response of the Saudi authorities and arguing the situation has been “contained”.

Speaking on Bloomberg television, Mr Barkindo said there were no plans for an emergency Opec meeting, insisting: “We do not have any panic button per se in Opec at the moment.”

We are pleased that the Saudi authorities and Aramco in particular have risen to the challenge. The way and manner in which they have handled this development has been commendable.

They have ample supplies in inventories they are going to tap into. So by and large I think they have contained the situation so far but we are waiting for the regular updates that Aramco will be informing the market with.

There is no need to panic at the moment. What we have seen in the markets today is an initial reaction from the trading community but going forward I think the further updates that will be coming from Saudi will calm the markets.

China: Irresponsible to point fingers without facts

The FT’s Tom Hancock in Beijing writes:

China’s foreign ministry has said it is irresponsible to blame anyone for the attack on Saudi Arabia’s oil facilities without conclusive facts, Reuters cited ministry spokeswoman Hua Chunying as saying at a regular news briefing on Monday.

Saudi Arabia has been China’s top oil supplier this year.

Société Général: Higher risk premium going forward

The risk premium attached to the price of oil is “bound” to be higher going forward as a result of Saturday’s attacks, according to Kit Juckes of Société Général.

As policymakers look ahead to Wednesday’s Federal Reserve meeting, there are three questions to consider now, according to Mr Juckes:

- How fast can supply recover
- Can further attacks be prevented
- What will the wider geopolitical implications be?

Oil prices spiked higher but drifted down into the European open. However, even for those who aren’t sceptical about Saudi claims to be able to restore a third of the lost output as early as today, there is bound to be a higher risk premium attached to prices going forwards.

Slower global growth was beginning to act as a drag on oil prices, but the risk premium goes the other way and that in turn is another drag on global growth.

Speculators bullish on oil ahead of Saudi attacks

Hedge funds and speculators increased bullish bets on US crude oil before Saturday’s drone attack on critical Saudi Arabian oil infrastructure, writes the FT’s natural resources editor Neil Hume.

The net long position – the difference between bets on rising and falling prices – rose by almost 33,000 contracts – or 20 per cent – to 201,168 in the week to September 10, according to exchange data.

Speculators also raised their net long positions in Brent, the global oil benchmark, by 51,639 to almost 294,000 contracts in the same period.

Overall, the hedge fund community’s positioning across the oil market is currently in line with longer-term averages. Speculators have been wary of a running big, bullish position in oil because of concerns about the US-China trade war and its impact on global growth.

But for those who increased their positions last week, Monday’s sharp spike in oil prices following the attacks in Saudi means they will be in the money.

Saudi inventories key buffer against wider price fallout

Oil’s price spike following Saturday’s attacks is likely to be “short-lived”, according to Bjørnar Tonhaugen, head of oil market research at Rystad Energy, pointing to the role played by Saudi Arabia’s reserves in keeping the market supplied.

The bullish reaction in oil prices will likely be limited by Saudi Arabia’s vast quantities of crude in storage, estimated to equal roughly 26 days of current crude exports, a large portion of which is at the main export terminal Ras Tanura. The country also has strategic storage facilities in Rotterdam, Okinawa and Sidi Kerir (Egypt).

The comments echo those of Opec secretary general, Mohammad Barkindo, who pointed to Saudi’s “ample supplies in inventories they are going to tap into”.

However, looking forward, Mr Tonhaugen adds that the world is “not even close” to being able to replace the more than 5m barrels a day that the Kingdom exports. Attention will turn to other strategic reserves if the situation is not resolved quickly, he says.

In a scenario where the damages result in a longer duration of the 5.7 million barrels per day production shut-in, say for 10 days or more, the situation for Saudi Arabian crude flows to the market will be critical, in our view, as there are limits globally to the volume of export replacement barrels.

Strategic Petroleum Reserves in the OECD countries would then be called upon. The US stands as one of the few countries that would be able to increase exports in the short term. We believe US crude exports could potentially be increased by about 1 million bpd, from 3 million to 4 million bpd, if prices allow for higher utilization of the current crude exports capacity

The global flow of crude oil will not be disrupted immediately, Rystad Energy believes, due to storage capacity at the main export terminals. However, the longer the processing facility remains disrupted, the larger the potential impact on actual crude flows will be.

How emerging Asian economies will feel higher oil prices – Goldman Sachs

Research from Goldman Sachs illustrates the potential impact of higher oil prices on growth and inflation in Asia’s emerging economies, which include China, South Korea, Singapore and Thailand.

Jonathan Sequeira shows in his charts that an oil price increase from $60 to $70 a barrel over a sustained period will push gross domestic product 1.1 percentage point lower in Singapore, 0.6 points in Thailand and 0.5 points in South Korea, according to his value at risk measure, yet China will barely be affected.

Here’s his GDP chart:

For inflation, using the same VAR criteria, the oil price will hit the Philippines the most with an added 1.8 percentage points to GDP. Thailand and Malaysia will have 0.9 percentage points added while Indonesia and South Korea will also be affected, with 0.8 points and 0.6 points respectively. China again will not feel the pain on its growth figures.

Take a look:

All eyes on the White House

As we edge closer to morning on the US East Coast, markets will be looking anxiously to the White House to hear what steps President Donald Trump plans to take in response to the attacks.

Mr Trump tweeted yesterday that the US was “locked and loaded” for potential reprisals once the identity of the “culprit” was verified by the Saudi authorities.

Iran-backed Houthi militias in Yemen claimed responsibility for the attack, but Mike Pompeo, Mr Trump’s secretary of state, has explicitly blamed Iran: “Iran has now launched an unprecedented attack on the world’s energy supply. There is no evidence the attacks came from Yemen.”

Piotr Matys, emerging markets FX strategist at Rabobank said “markets are likely to remain nervous awaiting a response from the US president” following what he described as “ominous” comments over the weekend.

Moody’s: Credit impact of attacks on Saudi Aramco and oil prices

The weekend attack on Saudi Arabian oil facilities is a “credit negative” on Saudi Aramco but, because of its financial strength, it will not leave a “long-lasting impact” on the company, Moody’s Investor Service said in a note on Monday.

“While the drone attacks on key Saudi Arabian oil facilities [are] a credit negative and production disruption is significant, we do not expect this to leave a long-lasting impact on Saudi Aramco’s financial profile given its robust balance sheet and strong liquidity buffers,” said Rehan Akbar, a Moody’s vice president.

The state oil group, the world’s most profitable company, last week chose a range of international and local banks to handle its much anticipated initial public offering, which if successful would be one of the world’s largest.

On oil prices, Mr Akbar said:

This event however highlights the credit linkages the company has to Saudi Arabia both in terms of geographic concentration and more importantly exposure to geopolitical risk.

A look at Aramco’s strategic storage facilities

Aramco, Saudi Arabia’s state energy behemoth, has three strategic commercial oil storage facilities around the world, according to JPMorgan’s commodities analysts. This is an important factor to consider as analysts tabulate the potential effects to world oil supply caused by the attacks on the company’s facilities.

Aramco’s strategic facilities are located in:

-Rotterdam (Netherlands)
-Okinawa (Japan)
- Sidi Kerir (Mediterranean coast of Egypt)

JPMorgan notes:

Depending on the extent of the damage, the Saudis can release oil from their commercial storage sites abroad alongside domestic storage facilities. Saudi Arabia has three strategic storage locations around the world: Rotterdam (Netherlands), Okinawa (Japan) and Sidi Kerir (Mediterranean coast of Egypt).

The capacity between the three is at least 12mn bbl based on available data. Total Saudi crude inventories current stand at 187.9mn bbl based on JODI data.

Abqaiq and Khurais: The facts

Saturday’s attacks hit two key pieces of Aramco infrastructure: the Abqaiq oil processing facility and the Khurais oil field.

What are they and why do they matter? The folks at JP Morgan have looked into the details:

1. Abqaiq

Abqaiq is a crude processing facility with a capacity of 7m barrels a day.

It is Aramco’s largest oil processing facility and the largest crude stabilisation plant. The extent of its processing capacity makes it one of the group’s key assets.

Located about 70km southwest of Aramco’s headquarters at Dhahran, Abqaiq receives sour crude from gas oil separation plants, blending and processing it into sweeter crude oil for transport to Ras Tanura and Jubail ports on the east coast, Yanbu on the west coast and the Bapco refinery in Bahrain.

The main grades that it oversees are Arabian Extra Light, Arabian Light crude oils and Natural Gas Liquids.

2. Khurais

The Khurais oil field has a production capacity of 1.5m barrels a day.

It is an onshore field, based 180km east of Riyadh.

Four oil processing trains each with a capacity of 300 kbd were reported to have been hit.

Gold back above $1,500 on haven demand

Gold is back above $1,500 a troy ounce after the drone attack on key oil facilities in Saudi Arabia added to concerns about stability in the Middle East, reports Neil Hume, the FT’s natural resources editor.

The metal — often used as a store of value during times of geopolitical and financial uncertainty — rose by more than 1 per cent to $1,503 amid increased demand for haven assets.

“This together with the expectation of another round of Fed rate cut in September will support gold prices further,” said Helen Lau of Argonaut Securities.

Gold has enjoyed a strong run this year, rising 17 per cent as investors have become increasingly worried about a global economic slowdown. The metal’s appeal has been enhanced by negative bond yields.

But after peaking this month at $1,552 gold has been hit by profit taking and drifted lower. The price of the metal could now find support as the world waits to see what response if any comes from Saudi Arabia and its allies.

President Donald Trump tweeted yesterday that the US was “locked and loaded” for potential reprisals once the identity of the “culprit” was verified by the Saudi authorities.

Russia urges against ‘hasty steps’ that would aggravate regional tension

Moscow has warned against “hasty conclusions” following the attack on Saudi Arabian oil infrastructure, ahead of talks between Russian president Vladimir Putin and his Iranian counterpart, writes Henry Foy in Moscow.

Mr Putin is due to meet Iranian president Hassan Rouhani in Turkey on Monday afternoon. The US has accused Iran of being behind the attack.

“You know that we have a negative attitude towards increasing tensions in the region and urge all regional and non-regional countries not to take any hasty steps or conclusions that can only aggravate destabilisation and, on the contrary, to stick to a line that will help absorb the tension that is present,” Mr Putin’s spokesman Dmitry Peskov told reporters.

“As for some hasty conclusions, we have never been and are not supporters of such a line,” he said in response to a question regarding US accusations.

US president Donald Trump has said the country was “locked and loaded” to respond.

Mr Peskov also said that Russia had not received any appeals for help from Riyadh.
“No. There were no requests from our Saudi partners”, adding that “some kind of exchange of views” between Mr Putin and other world leaders today was possible.

He added:

As for the incident itself, we have already said that this is a very, very unpleasant story, of course, with negative consequences for the global energy markets.

We hope that the Saudi side will be able to deal with the damage that was caused as a result of this attack in the very near future.

Rally picks up steam

The rally in the price of oil has picked up as we move into early morning trading in New York.

Oil was recently up 10 per cent, jumping from the roughly 8 per cent rise it had been trading at earlier in the London morning.

Citi: Russia could boost crude output within days or weeks

While Russian officials have not implied the country will be boosting crude output, Citi analysts believe the country may do so within days or weeks to cover up for the missing Saudi volumes.

“If Saudi crude production outages last more than a week or two, we think Russian oil production may be allowed to rise to act as a partial offset,” Citi analysts said in a note.

We estimate that, as of August, Russia had about 295,000 barrels a day of total idle capacity, including about 40,000 barrels a day from Gazprom’s seasonally low production of natural gas liquids.

Excluding that, we estimate that Russia has about 250,000 barrels a day of oil production purposefully idled due to Opec+ constraints, and therefore available on relatively short notice.

The analysts believe Russia could ramp up that output within “a few days to a few weeks, depending upon the complexity of the field management programme in question”.

Rosneft, Russia’s top crude producer, would be the largest winner given its production flexibility, debt load and financial leverage, which would mean higher returns for shareholders in case of higher earnings, they said.

Rosneft, Lukoil or Gazprom Neft, Russia’s top three producers, declined to comment on the issue.

US energy stocks jump in early trade

Energy stocks in the US were higher across the board on Monday after an attack on Saudi Arabia’s oil infrastructure cut more than half its output and boosted crude prices.

Here are some of the biggest gained in pre-market trade:
– ExxonMobil up 3.5%
– Chevron up 3.2 per cent%
– Marathon Oil up 10.4%
– ConocoPhillips up 6.7%
– Schlumberger up 5.6%
– Kinder Morgan up 2%
– Occidental Petroleum up more than 6%

The crude price gains are set to boost the broader S&P 500 energy sector, which is up about 5 per cent year-to-date, when US stock markets open at 9:30 am local time.

As of Friday’s close, energy was the second worst performing sector on the benchmark index so far this year weighed down by the US-China trade war, global growth worries as exploration and production or so-called upstream companies in particular were more exposed to fluctuating commodity prices. That followed a 20 per cent drop in 2018 — making energy the biggest S&P 500 decliner last year, with its worst annual showing in three years.

Trump weighs in

The US president has made his first comments of the day on the situation in Saudi Arabia, insisting the US’s own production means it is not reliant on Middle East output, but adding that the country “will help our Allies”.

Donald Trump took to Twitter to thank himself for the US’s newfound energy independence. The country’s rapid expansion in shale oil production saw it last year become the biggest producer of crude globally.

Russia warns US on ‘unacceptable’ threat of retaliation

The FT’s Henry Foy writes:

Russia’s foreign ministry has said US threats of retaliation for the attack on Saudi Arabia’s oil infrastructure are “unacceptable”, and warned against using the incident to inflame tensions with Iran.

The US has accused Iran of being behind the attack and president Donald Trump has said the country is “locked and loaded” to respond. Russia has good ties with both Saudi Arabia and Iran, and president Vladimir Putin meets his Iranian counterpart on Monday.

“We consider it counterproductive to use what happened to foment tensions against Iran in line with the well-known US approach,” the ministry said in a statement. “And all the more unacceptable are options that provide for steps of retaliatory force, which are allegedly being discussed at present in Washington.”

The ministry said it “strongly condemned attacks on non-military targets”, and said such attacks are “a direct result of the ongoing acute political and military crisis in the Republic of Yemen. “

South Korea considers releasing strategic reserves

The FT’s Song Jung-a reports from Seoul:

South Korea said on Monday that it would consider releasing some of its strategic oil reserves if oil supply conditions worsen in the wake of the drone attack on Saudi Arabia’s oil facilities.

South Korea, the world’s fifth-largest crude importer, has about 96m barrels of crude oil and refined products as strategic stockpiles, which can cover about three months of the country’s oil requirements.

Seoul’s energy ministry said it did not expect any short-term disruption to crude oil imports as 87 per cent of its oil imports from Saudi Arabia are long-term contracts of up to 20 years. However, the ministry cautioned that it could disrupt oil supplies if the situation gets prolonged. It added that it would focus on securing alternative supplies from other oil producers, if necessary, in cooperation with domestic refiners.

Saudi Arabia is South Korea’s top oil supplier. South Korea imported 323m barrels of crude from Saudi Arabia, accounting for nearly 30 per cent of its total oil imports, according to data from the Korea Petroleum Association.

Domestic refiners also said there was no big disruption yet to oil supplies although short-term price hikes were inevitable.

Germany not anticipating ‘lasting impact’ on global supply

The FT’s Berlin bureau chief Guy Chazan, writes:

Beate Baron, a spokeswoman for the German economics ministry, said Germany’s “energy security has so far been unaffected” by the attacks.

According to the information we have and which Saudi Arabia has itself announced, the outage at the refineries will last from a few days to two weeks, so we don’t assume it will have a lasting impact on global oil supply.

She also said Germany had “taken note” of the decision to release oil from its strategic reserve, but Germany can’t release its own reserves – it can only be done in conjunction with other member states of the IEA.

Alexander von Gersdorff, spokesman for the German petroleum industry association, said:

There will be no impact on German energy security. Germany can be quite relaxed about the situation – it gets its oil supply from 30 countries, and only 0.8 per cent of imported oil came from Saudi Arabia in the first quarter. It is also very easy to find alternative sources, as was the case during earlier outages in the case of Venezuela and Libya.

India: ‘We are just waiting and watching’

The FT’s Stephanie Findlay reports from New Delhi:

An Indian petroleum official said the country was “monitoring the situation” but that it was confident its supply of oil would not be affected following Saturday’s incident.

They have said there will be no drop, our supplies will not be affected.

We are just waiting and watching the situation.

The situation is under watch, we are monitoring the situation, and so far, things seem to be under control.

The official added that “there has not been discussion or any change” regarding buyers being asked to take heavier grades.

Iraq says Pompeo has confirmed it was not source of attack

Chloe Cornish, the FT’s Middle East correspondent, writes:

Mike Pompeo, the US secretary of state, confirmed Iraq was not where the attacks came from during a call with the Iraqi prime minister, according to a statement from the Iraqi prime minister’s office.


Saudi oil production may take months to recover fully

Three people briefed on the latest damage assessments said on Monday that Saudi Arabia’s oil production could take months to return to full capacity, potentially thwarting efforts to calm the market, report David Sheppard, Anjli Raval and Hudson Lockett.

State oil group Saudi Aramco has been scrambling to arrange repairs and to bring oil output back online in the world’s largest oil exporting country. The company did not immediately respond to requests for comment.

With some of the shutdowns only precautionary, part of the 5.7m barrels a day of lost supplies is likely to return earlier. But initial assessments of damage to key equipment in the kingdom suggest getting back to full capacity will take longer than previously indicated.

Read the full story.

Possible outcomes of the Aramco attack

Capital Economics has outlined three possible scenarios for crude in the wake of the attack on Saudi Aramco.

Scenario 1: Aramco restores output fully in the next week so there is minimal disruption to global oil supply. In this scenario, they expect oil prices to quickly slide to around $60 a barrel. This is also the outcome that Capital Economics thinks is most likely.

Scenario 2: It takes months to restore production and tensions remain high. “Prices would rise further, to around $85 per barrel, as the market struggled to fill the void left by the outage in Saudi Arabia. What’s more, we think prices would stay at around $85 for several years owing to a higher risk premium.”

Scenario 3: Escalating tensions lead to outright military conflict in the Middle East prices would soar to over $150 a barrel by the end of the year. However, they expect this could encourage production elsewhere, like the US, and that could see prices fall rapidly over the course of 2020.

January 1991: ‘War fears unsettled financial markets’

Oil prices spiked by almost 20 per cent overnight, the biggest intraday rise since January 14, 1991, during the first Gulf War.

The Financial Times captured the action on the front page on January 15, saying oil prices jumped $3 a barrel “as traders became convinced that a conflict in the Gulf was now virtually unavoidable”.

Here is that day’s front page:

A closer look at the story:

And finally a chart of the top-10 biggest intraday spikes since 1990:

Oily-currencies gain

Currencies of economies with large oil exports gained on Monday, with the Norwegian krone, Canadian dollar and Russian rouble all advancing against the US dollar.

– The US dollar was down as much as 0.8% against the krone to NKr8.9143 before trimming its declines to 0.2%.
– The buck fell as much as 0.6% against the loonie to C$1.3207 before trimming its declines to trade 0.3% lower.
– The US dollar also fell as much as 1.1% against the rouble at its lowest to Rbs63.66 per US dollar but has since pared back its declines to trade down 0.6%.

‘We’ll see’: Trump questions Iran’s denials

The US president is dubious over Iran’s claim it had no involvement in Saturday’s attack, his latest tweet makes clear.

Donald Trump drew parallels with the shooting down of a US drone by the Islamic Republic in June, saying the country’s assertion at the time that the drone had been in its airspace was “a very big lie”.

“Now they say that they had nothing to do with the attack on Saudi Arabia,” he tweeted. “We’ll see.”

Iran-backed Houthi militias in Yemen have claimed responsibility for the attack and Tehran has said it was not involved. But Mike Pompeo, Mr Trump’s secretary of state, has explicitly blamed Iran for what he called “an unprecedented attack on the world’s energy supply”.

US energy stocks jump at the open

Over in the US, a host of American energy stocks have spiked at market open on the news from Saudi Arabia, writes Jamie Powell, FT Alphaville reporter.

Among the biggest winners are exploration and production names Whiting Petroleum (35.5 per cent) and Chesepeake Energy (11.8 percent). Fracking companies such as Oasis Petroleum (15.6 per cent) have also risen on the news.

Broad energy sector ETFs are also up in early trading. The Standard and Poor’s Oil and Gas Exploration and Production ETF, ticker XOP, has jumped 7.50 per cent while the VanEck Vectors Oil Services ETF, ticker OIH, is up 8.28 per cent.

Saudi-led coalition says weapons used in attack were Iranian

The Saudi-led military coalition battling Yemen’s Houthi movement has said Saturday’s attack was carried out by Iranian weapons and did not originate from Yemen, according to preliminary findings, Reuters has reported.

Coalition spokesman Colonel Turki al-Malki told a press conference in Riyadh that an investigation into Saturday’s strikes, which had been claimed by the Houthi group, was still ongoing and authorities were trying to ascertain the launch location.

That’s all for today

Thank you for joining the FT’s live blog on today’s surge in the oil price. We’re closing-up but there will be plenty of updates throughout the day on