Goldman Sachs Warns Extended Saudi Oil Outage Could Spike Brent Crude Prices, Calls Attacks 'Historically Large Disruption'

A prolonged outage in Saudi Arabian oil production could drive Brent crude oil prices up to $75 per barrel, Goldman Sachs analysts warned in a note calling Saturday's attacks a "historically large disruption."

"This is nonetheless a historically large disruption on critical oil infrastructure and
these events represent a sharp escalation in threats to global supply with risks of
further attacks," analysts from the bank wrote in a Sunday note.

"An outage at current levels of two to six weeks would, in addition to this move in long-dated prices, see a steepening of the Brent forward curve (2-mo vs. 3-year forward) of $2 to $9/bbl respectively. All in, the expected price move would be between $5 and $14/bbl, commensurate to the length of the outage (a six month outage of 1 mb/d would be similar to a six week one at current levels)," the note said. "Should the current level of outage be announced to last for more than six weeks, we expect Brent prices to quickly rally above $75" per barrel.

Attacks claimed by Yemen's Houthi rebels hit Saudi Arabia's Khurais oilfield and Abqaiq processing facility, the world's largest oil processing plant, early Saturday morning.

The U.S. blamed Iran for the attacks. President Donald Trump tweeted that "there is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!"

Iran has denied involvement in the strikes, which knocked out nearly half of Saudi Arabia's daily oil production.

Reuters reported that the damage from the attacks had stopped production of about 5 million barrels per day, a figure that amounts to nearly 5 percent of global production. Saudi Arabia said it aimed to restore one-third of lost output on Monday. But concerns about the global oil supply have sent prices rising. Prices for Brent crude oil, which is regarded as the global benchmark, rose 10 percent to reach $66.37 per barrel.

Rising oil prices would particularly have an impact on transportation companies, and Barron's wrote that airline stocks had fallen about 4 percent following the weekend's attacks.

The attacks came as Saudi Aramco, which is the world's most profitable company and which analysts say is worth $1.5 trillion, was preparing for an IPO. The Wall Street Journal reported on Monday that Saudi officials were discussing whether to delay the IPO due to the attacks.

Saudi
A picture taken on September 15 shows an Aramco oil facility near al-Khurj area, just south of the Saudi capital of Riyadh. FAYEZ NURELDINE/AFP/Getty Images
Goldman Sachs Warns Extended Saudi Oil Outage Could Spike Brent Crude Prices, Calls Attacks 'Historically Large Disruption' | News
{{label}}
{{title}}
EDITOR'S PICK