Crude Oil Prices Spike on Fresh Houthi Attack on Saudi Arabia

imageCommodities20 hours ago (Apr 23, 2021 15:51)

© Reuters.

By Geoffrey Smith — Crude oil prices climbed on Friday as Houthi rebels in Yemen again attacked Saudi Arabian oil installations with drones, in a fresh reminder of the risk to key export infrastructure.

By 10:45 AM ET (1445 GMT), U.S. crude futures were up 1.1% at $62.12 a barrel, while Brent futures were up 0.9% at $66.00 a barrel. Both contracts were still on course to end the week lower, however, and the move looked more like short-covering than the start of a rally into new ranges.

Reuters reported a Houthi military spokesman as saying that the group had targeted the King Khalid air base with two drones and had struck a facility of Saudi Arabia’s oil company Aramco (SE:2222) with a drone in the southwestern Saudi city of Jizan.

The extent of the damage, if any, from the strikes, wasn’t immediately apparent. The rebels have consistently targeted oil export infrastructure with drone strikes in recent weeks in an apparent attempt to gain leverage for their backers in Iran, which is trying to negotiate the lifting of sanctions against it by the U.S.

However, there had also been signs earlier in the day that market fundamentals, too, had been improving, as purchasing manager indices in both the Eurozone and the U.S. exceeded expectations, reassuring about the of recovery in two of the world’s biggest demand centers. Rising demand in the western world has had to be offset against increasing signs of problems in both India and Japan this week. Both countries have imposed widening lockdowns to tackle what is, in India’s case in particular, the most acute phase of the pandemic yet.

Paola Rodriguez-Masiu, an analyst with the consultancy Rystad Energy, argued in a note that the PMIs from Europe were “a sign that demand is ticking up” despite the start of a new national lockdow in Germany, the region’s biggest economy. She pointed out that France is already starting to remove restrictions after flattening its infection curve. Germany, for its part, is still struggling to bring its case numbers down but can point to a rapidly accelerating vaccination campaign as a sign of long-term progress.

Rodriguez-Masiu said that the market may have underestimated the strength of the recovery in demand, which she said is likely to lead to increasing stock drawdowns over the summer in the absence of considerably more supply. At present, the so-called OPEC+ bloc is set to increase supply by some 2 million barrels a day by the end of June.

“Huge crude stock draws in the second part of the summer season are not yet priced in the curves and could easily lead to a price rally,” she argued.

Elsewhere Friday, oilfield services giant Schlumberger (NYSE:SLB) said it expected a clear recovery in international drilling later in the year.  Later, Baker Hughes will report on whether domestic drilling has picked up any further after its weekly rig count hit the highest level in a year last week at 344. 

Crude Oil Prices Spike on Fresh Houthi Attack on Saudi Arabia

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