|16 September, 2019

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

A disruption over such a 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: Goldman

Image used for illustrative purpose. A pumpjack (oil derrick) and oil refinery in Seminole, West Texas.

Image used for illustrative purpose. A pumpjack (oil derrick) and oil refinery in Seminole, West Texas.

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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 a 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.

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.  

Listing out other scenarios dependent on the actual duration of the outage, analysts at the bank said a very short, or about week-long outage, could push prices up by $3-$5 a barrel, while a 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."

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. 

(Reporting by Arpan Varghese in Bengaluru, editing by Louise Heavens) ((arpan.varghese@thomsonreuters.com; +91-80-6749-6382 / 1298 (If within U.S. call 651-848-5832 ); Reuters Messaging: arpan.varghese.thomsonreuters.com@reuters.net))

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