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Brent could rally above $75 if Saudi outage extends beyond 6 weeks: Goldman

Oil prices surged on Monday, with global benchmark Brent crude posting its biggest intra-day percentage gain since the Gulf War in 1991, after the attack on Saturday shut over 5% of global supply.

By: Reuters |
September 16, 2019 4:14:27 pm
Saudi oil field attack: Brent could rally above  if outage extends beyond 6 weeks: Goldman Smoke is seen following a fire at an Aramco factory in Abqaiq, Saudi Arabia on September 14, 2019, in this picture obtained from social media. (Source: Reuters)

Goldman Sachs said an outage of more than six weeks due to drone attacks on Saudi Arabian oil facilities over the weekend could cause Brent prices to rally above $75 a barrel, although the magnitude of the impact was uncertain at this point.

A disruption over such duration at current levels would not only push up Brent prices but also result in the release from Strategic Petroleum Reserves “large enough to balance such a deficit for several months and cap prices at such levels,” the Wall Street bank said in a note dated Sunday.

Read | Oil prices soar to 4-month high after an attack on Saudi facilities hits global supply

Oil prices surged on Monday, with global benchmark Brent crude posting its biggest intra-day percentage gain since the Gulf War in 1991, after the attack on Saturday shut over 5% of global supply.

Explained: Why twin strikes on Saudi Arabia oil facilities matter worldwide

Listing out other scenarios depending on the actual duration of the outage, analysts at the bank said a very short, or about a week-long outage, could push prices up by $3-$5 a barrel, while disruption of two to six weeks would result in a $5 to $14 per barrel move.

“An extreme net outage of a 4 Mb/d (million barrels per day) for more than three months would likely bring prices above $75/bbl to trigger both large shale supply and demand responses.”

Also Read | Aramco attacks show company entanglement in Saudi politics

Meanwhile, British bank Barclays said the attacks are unlikely to reduce Saudi Arabia’s oil exports dramatically since it holds a significant amount of crude oil and petroleum products in storage.

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