Hey fellows.
I don't usually trade Crude Oil, but after seeing the events that occured this weekend i'd like to share some research and give my opinion.
Key points:
1. The closure of the plants will cause a production shortage of as much as 150MM barrels per month. An outcome like this could send oil prices to triple digits
2. Saudi Aramco claims that it can quickly recover, and that the supply will be replenished quickly. But they are surely replenishing this supply using their reserves as it is impossible to conduct such large scale repairs over such a short period of time.
3. In a press release, the Houthi rebels have said that "This is just the beggining, there will be many more attacks like this as long as Saudi Arabia keeps opressing them". So this can lead to increased uncertainty, if this happened now, perhaps it can happen again very very soon. The situation escalated.
4. Saudi Aramco IPO might lose significant value based on this. Not many investors would buy bonds of a company that faces drone attacks in an area of great war risk and uncertainty.
5. Saudi Arabia’s stock market fell by 2.3% at Sunday’s open. (they trade regulary trade Sundays)
6. Saturday’s attack is the biggest on Saudi oil infrastructure since Saddam Hussein’s invasion of Kuwait in 1990, when Iraq’s military fired scud missiles into the kingdom.
Now... a quote:
“A small $2-$3 premium would emerge if the damage appears to be an issue that can be resolved quickly, and $10 if the damage to Aramco’s facilities is significant leasing to prolonged supply outages,” - Ayham Kamel - practice head for the Middle East and North Africa at Eurasia group
Conclusion:
I believe that the markets have not priced in the geopolitical risk into the oil price, and that they mostly focus on macro data. After this incident the geopolitical risk might start to be priced in. I expect WTI crude oil to open at around 57$ and rise until about 63$ per barrel.
Just remember, we are traders who follow the market, and this is something that was on the news for the general public. We have a chance to enter the market as soon as it opens... that's a huge advantage for us, with a bit of clever risk managment this can be one of the best trades to take right now. The market will likely rise during the day as people start buying into this, i expect more spikes at the LSE and NYSE open, or better said when Europe / USA start waking up.
I will be going long as soon as the market opens (Unless it opens "too high"). This is a great potential for profit. Good luck,trade safe.
I don't usually trade Crude Oil, but after seeing the events that occured this weekend i'd like to share some research and give my opinion.
Key points:
1. The closure of the plants will cause a production shortage of as much as 150MM barrels per month. An outcome like this could send oil prices to triple digits
2. Saudi Aramco claims that it can quickly recover, and that the supply will be replenished quickly. But they are surely replenishing this supply using their reserves as it is impossible to conduct such large scale repairs over such a short period of time.
3. In a press release, the Houthi rebels have said that "This is just the beggining, there will be many more attacks like this as long as Saudi Arabia keeps opressing them". So this can lead to increased uncertainty, if this happened now, perhaps it can happen again very very soon. The situation escalated.
4. Saudi Aramco IPO might lose significant value based on this. Not many investors would buy bonds of a company that faces drone attacks in an area of great war risk and uncertainty.
5. Saudi Arabia’s stock market fell by 2.3% at Sunday’s open. (they trade regulary trade Sundays)
6. Saturday’s attack is the biggest on Saudi oil infrastructure since Saddam Hussein’s invasion of Kuwait in 1990, when Iraq’s military fired scud missiles into the kingdom.
Now... a quote:
“A small $2-$3 premium would emerge if the damage appears to be an issue that can be resolved quickly, and $10 if the damage to Aramco’s facilities is significant leasing to prolonged supply outages,” - Ayham Kamel - practice head for the Middle East and North Africa at Eurasia group
Conclusion:
I believe that the markets have not priced in the geopolitical risk into the oil price, and that they mostly focus on macro data. After this incident the geopolitical risk might start to be priced in. I expect WTI crude oil to open at around 57$ and rise until about 63$ per barrel.
Just remember, we are traders who follow the market, and this is something that was on the news for the general public. We have a chance to enter the market as soon as it opens... that's a huge advantage for us, with a bit of clever risk managment this can be one of the best trades to take right now. The market will likely rise during the day as people start buying into this, i expect more spikes at the LSE and NYSE open, or better said when Europe / USA start waking up.
I will be going long as soon as the market opens (Unless it opens "too high"). This is a great potential for profit. Good luck,trade safe.
Through the light of enlightenment, darkness unveils the path of truth.
6
D
