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OMCs fall 4-5% as Saudi refinery attack spur global oil prices

The Energy Index was trading lower by 1.5 percent in early trade with HPCL and BPCL shedding 5 percent each.

September 16, 2019 / 10:33 AM IST
 
 
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Oil prices retreated on September 16 after hitting their highest since May at the open, on fears over supply disruptions following an attack on Saudi Arabia’s oil facilities on September 14 that cut more than 5 percent of global oil supply.

Brent crude futures rose $7.06 a barrel or 11.7 percent from their New York close on Friday to stand at $67.28 per barrel after soaring more than 19 percent to a session high of $71.95 per barrel at the opening.

State oil giant Saudi Aramco said the attack cut output by 5.7 million barrels per day, at a time when Aramco is trying to ready itself for what is expected to be the world’s largest IPO.

The Sudden surge in international oil prices had a direct effect to Indian oil marketing companies. The Energy Index was trading lower by 1.5 percent in early trade with HPCL and BPCL shedding 5 percent each. Indian Oil Corporation was down over 2 percent while heavyweight Reliance Industries was also trading in the negative territory.

The S&P BSE Energy was down close to 2 percent led by HCPL, BPCL, Chennia Petroleum Corporation, Indian Oil Corporation and Reliance Industries.

"A 5 percent hit on global oil supplies is significant and oil prices are expected to spike once markets open on September 16," Emkay Global said.

Historically, prices have jumped over 10 percent after such major events. Hence, a $5-7 per barrel jump can happen. Although it may stabilise if the affected production is brought back quickly, the brokerage added.

This is expected to impact not only oil retailers but also global equity markets including India -- which imports more than 85 percent of its oil requirement -- as 5 percent of global oil supply disruption is big, experts feel.

Pritam Kumar Patnaik, Head Commodities at Reliance Commodities said that the drone attack on Saudi Aramco oil facilities on Saturday is estimated to impact 5 million bpd of oil production and further news that Saudi Arabia plans to shut down about half of it's output after strike will have impact on the overall oil prices and global economy.

The impact of the same has been already witnessed on both NYMEX and Brent oil prices, which have rallied more than 10 percent.

The immediate range for Nymex crude will be USD 56 to 63 per barrel. With USA accusing the Iranian government of orchestrating the attack and Iran in turn threatening war, there by further destabilising the region at large and further impacting future supplies, the oil prices are expected to remain firm.

However, prices eased off their peaks after US President Donald Trump said he approved the release of oil from the US Strategic Petroleum Reserve (SPR) if needed in a quantity to be determined due to the attack on Saudi Arabia’s facilities.

Sandip Das
first published: Sep 16, 2019 10:07 am

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