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Oil Dips Over 1% As Hype Over Saudi Attack Fades

CommoditiesMar 08, 2021 03:56PM ET
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© Reuters.

By Barani Krishnan

Investing.com - Crude prices fell more than 1% Monday, pulling benchmark Brent back from highs above $70 per barrel, after it became apparent that a drone attack on a Saudi oil facility by Iran-sympathizing Yemeni Houthis did not cause the kingdom any loss in production.

It wasn’t the first time that a Saudi oil location had been targeted since the massive September 2019 hit on the Abqaiq complex that impacted the kingdom’s energy production for weeks. But each attack since has been countered with increasing efficiency by the Saudi authorities, providing little justification for crude prices to go spiking the way they typically did.

Sunday’s raid on the Ras Tanura oil port on the Persian Gulf was no different.

Brent got to as high as $71.38 per barrel after the raid on the port, breaching $70 the first time since January, before falling back. It settled the session at $68.24, down $1.12, or 1.6% from Friday’s close.

U.S. crude benchmark , the West Texas Intermediate, also settled down 1.6%, or $1.04, at $65.05. 

Crude prices spiked after a Houthi military spokesman said at the weekend that his side had struck the oil port and military targets in the Saudi cities of Dammam, Asir and Jazan. 

The Saudi-led military coalition engaged in Yemen said it intercepted 12 Houthi drones, including two ballistic missiles fired towards Jazan. Saudi Aramco (SE:2222), the kingdom’s oil company, later said none of its operations had been affected.

“It’s the usual kind of hype that gets the market all excited, only for people to realize later there’s no justification for the additional dollars they’ve put into Brent,” said John  Kilduff, founding partner at New York energy hedge fund Again Capital. “The market’s rightly given back what it should, though it remains overextended even at these levels.”

Ten months of output cuts by the world’s major oil producers have brought oil inventories in the so-called OECD, or developed countries, to “normal” five-year levels, from a glut a year ago caused by the coronavirus pandemic. A host of other factors, including optimism about economic recovery from Covid-19 vaccines, have also brought WTI up from April’s lows of minus $40 per barrel to Friday’s 13-month high of $66.40.

But there’s also a feeling that the rally has seriously overrun its course, with the U.S. crude benchmark up nearly 85% from the end of October. 

Even Saudi oil minister Abdulaziz bin Salman expressed doubts last week about the lofty projections being made for oil demand in the near term. The minister opted against a production hike for the kingdom in April while allowing just small increases for Russia and Kazakhstan, its allies in the OPEC+ producer cartel.

Oil Dips Over 1% As Hype Over Saudi Attack Fades
 

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Comments (4)
Frank Olivarez
Frank Olivarez Mar 08, 2021 7:13PM ET
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Crude $80 by May
Ernest Wong CA
Ernest Wong CA Mar 08, 2021 5:09PM ET
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For those who says Brent will hit $100 or more, are u guys "actually" all in???  I know talk is cheap. Do what you say here thanks :P
Arunas Nasvytis
Arunas Nasvytis Mar 08, 2021 4:02PM ET
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Oil need to dip another 5% over night! Short 🧞‍♂️
JG FEN
JG FEN Mar 08, 2021 4:02PM ET
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Too much support at 64.40 this will see $100 by June - has nothing to do with demand but supply and if you know how the OPEC agreement is tied to the dollar and know the history of the Saudi capitalizing on seminal economic events - certainly wouldnt be short longer than a small retracement window - which you just got
TK Trade
TK_Trade Mar 08, 2021 4:02PM ET
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JG FEN  Agree
Buki Marovci
Buki Marovci Mar 08, 2021 3:55PM ET
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that you can doit , for to bi normal and to not changed so much.
 
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