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BRENT WTI MOVE UP ON PROMISE OF US-CHINA TRADE TALKS

BRENT WTI MOVE UP ON PROMISE OF US-CHINA TRADE TALKS

06 September 2019

Brent Oil Futures was up 0.13% at $61.03 a barrel, as of 12:40AM ET (04:40 GMT), while Crude Oil WTI Futures was up 0.12% at $56.37 a barrel. The EIA...

PRAISE SINGERS  GO TO "GREET" NEW  GMD NNPC

PRAISE SINGERS GO TO "GREET" NEW GMD NNPC

04 August 2019

If journalism is to have meaning, to fulfill its raison d'etre, then it must be about speaking truth to power; giving a voice to the voiceless. The National Chairman of...

IS IT A NIGERIAN GAS FLARE COMMERCIALISATION PROGRAM ?

IS IT A NIGERIAN GAS FLARE COMMERCIALISATION PROGRAM ?

31 July 2019

The Nigeria Gas Flare Commercialisation Programme (NGFCP) is a prime example of a project well concieved but poorly executed and unlikely to achieve most of its objectives despite its inherernt...

VR CAPITAL BUY 25% OF P&ID AS NIGERIA FACE $9BN FINE

VR CAPITAL BUY 25% OF P&ID AS NIGERIA FACE $9BN FINE

05 June 2019

First, a health warning. This article is about recalcitrant, inept and quite possibly corrupt Nigerian politicians and government ministers. It is certainly about incompetence and misconduct in public office. It...

DISASTER AS UNEMPLOYMENT LEAPS BY 30%  TO 20.9m

DISASTER AS UNEMPLOYMENT LEAPS BY 30% TO 20.9m

29 May 2019

Nigeria is sleepwalking into a disaster which has the potential to unleash instability, insecurity and crippling hardship. Unemployment is always a cause for concern, it is the clearest indication that...

 NIGERIA NGIGE UNDEREMPLOYED OR UNEMPLOYABLE?

NIGERIA NGIGE UNDEREMPLOYED OR UNEMPLOYABLE?

08 May 2019

Working on the assumption that the Minister of Labour and Employment, Senator Chris Ngige has not been misquoted it is difficult to understand his recent pronouncement and what now seems...

NIGERIA ANOTHER MOU ANOTHER DAY

NIGERIA ANOTHER MOU ANOTHER DAY

01 May 2019

Nigeria has announced ambitious plans to double its oil production by 2025, targetting 4 million bpd in six years’ . Maikanti Baru, Group Managing Director at the Nigerian National Petroleum...

NNPC REFINERY WOES 2019

NNPC REFINERY WOES 2019

24 April 2019

The Nigerian Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has not unpredictably, stated that Nigeria’s continuous subsidy of petrol consumption means the Nigerian National Petroleum Corporation (NNPC) will...

NIGERIA OPEC STAND FIRM

NIGERIA OPEC STAND FIRM

28 March 2019

Nigeria and other member countries of the Organisation of Petroleum Exporting Countries (OPEC) as well as their non-OPEC allies led by the Russian Federation have said they are committed to...

PALM OIL PRODUCTION UNDERPERFORMS

PALM OIL PRODUCTION UNDERPERFORMS

18 March 2019

PALM OIL PRODUCTION A MEAGRE PERFORMANCE Nigeria from gaining a substantial share of the global oil palm industry now worth $62 billion annually, casting doubts on government’s ability to grow...

NIGERIA REFINING THE VISION

NIGERIA REFINING THE VISION

18 March 2019

NIGERIA REFINING THE VISION Nigeria is the only OPEC member country that imports gasoline (PMS) and holds the dubious distinction of being the largest importer in the world. The Nigerian...

IS THE PGB FATALLY FLAWED?

IS THE PGB FATALLY FLAWED?

18 March 2019

IS THE PIGB FATALLY FLAWED? Ten years after the Petroleum Industry Bill began its tortuous odyssey which has included the Bill being broken into four portions, both houses of the...

CBN PUMP UP THE T-BILLS

CBN PUMP UP THE T-BILLS

18 March 2019

CBN PUMP UP THE T-BILLS The Central Bank of Nigeria (CBN) plans to raise a total of N1.809 trillion from the debt market, in the first quarter of 2019.This is...

TIN EXPORTS NIGERIA

TIN EXPORTS NIGERIA

17 March 2019

TIN EXPORT NIGERIA Synterra are able to export high grade tin ore from Nigeria. We agregate the Mining production of a number of artisanal miners and consolidate volumes for exportSynterra...

BERYLLIUM MINING OPPORTUNITIES

BERYLLIUM MINING OPPORTUNITIES

17 March 2019

The Nigeria Solid Mineral and Mining Sector has in effect made the great leap forward which will now allow investors to take advantage of the vast mineral potential Nigeria possess....

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Wednesday, 18 September 2019 22:28

HOUTHI DRONES TEST MARKET MISPRICED RISK PREMIUMS ON SAUDI PRODUCTION

Written by
Houthi Drones expose Saudi Vulnerability and new market risk Houthi Drones expose Saudi Vulnerability and new market risk

President Trump said Wednesday he will tighten the economic screws on Iran, as the U.S. and Saudi Arabia begin to coordinate a response to the drone strikes on the kingdom’s oil processing facilities. US intelligence has put Iran firmly in the frame, though beyond the wreckage of crashed drones , currently there is no definitive evidence.

As a consequence oil prices extended their losses today as the market evaluates Trump's strategy of extending economic sanctions seemingly making a military response unlikely in the wake of the attacks on key Saudi Arabian oil installations last week.

Earlier today WTI futures were down at $58.12 a barrel, compared to $58.73 a barrel immediately before the Trump tweets. Dated Brent was at $63.37, down 1.7% on the day and down from $63.92 before the tweets. Oil prices had already fallen steeply on Tuesday, after Saudi Arabian Energy Minister Prince Abdulaziz bin Salman had said the kingdom expects to restore oil production levels to pre-attack levels by the end of the month.

Trump said via Twitter that he had “"just instructed the Secretary of the Treasury to substantially increase Sanctions on the country of Iran!" . Secretary of State Mike Pompeo is meeting Wednesday with Saudi leaders to discuss the Saturday drone strikes that disrupted the global oil supply. It seems unlikely that such a meeting will produce a grand plan of military action.

Saudi Arabia has adequate inventories to cover for the supply gap, but only for a few weeks. Though worryingly it has emerged that much of the country’s spare capacity may have become unusable, if only temporarily. And because Saudi Arabia accounts for the majority of the entire world’s spare capacity, the disruption would not leave a lot to fall back on. Prince Abdulaziz bin Salman has done a sterling job in allaying the fears of the oil market and convincing it that Saudi Arabia can quickly restore production.

There are however substantive issues which need to be assesed. Several days after the attack took place, it is still unclear how and what exactly struck the Abqaiq facility, or where the strike emanated . This raises the spectre of future attacks. Given the size of the processing facility it is a colossal single point of failure which amplifies supply side vulnerability. If as the Houthis would have us believe, they were responsible for the strike, they now alarmingly possess the capability to create global economic calamity. This is a risk that has been mispriced by the market and it will be interesting to see how the market reacts in the coming days as counter-measures are devised to mitigate the risk.


Some defense hawks in the U.S. want Trump to send a more forceful message. Notably Sen. Lindsey Graham, South Carolina Republican, he said Tehran might have interpreted President Trump’s decision to call off a military strike in June as a sign of weakness. President Trump who it now seems clear does not want to get embroiled in a war in the Middle East rejected that view, saying he is operating from a position of strength as the administration applies “maximum pressure” on Iran through sanctions.

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