NEW YORK, Sept 18, 2019 (BSS/AFP) – Oil prices sank more than five percent
on Tuesday, reversing some of the previous day’s gains as analysts predicted
Saudi output would recover sooner than expected after weekend drone attacks.
At the same time, global stocks were in a holding pattern while investors
awaited the US Federal Reserve’s latest decision on monetary policy due on
Wednesday.
Economists widely expect the Fed to cut interest rates.
In the space of several minutes during afternoon European trading, North
Sea Brent crude oil for delivery in November tumbled from $67.75 to $65.00.
It fell as low as $64.24, before recovering a little.
The market was already trading in negative territory after the previous
day’s record gains fueled by attacks on Saudi facilities which wiped out half
the kingdom’s crude output.
“The markets were once again wrong-footed by the Saudi news,” said
Forex.com analyst Fawad Razaqzada in reaction to Tuesday’s price drop.
“This time prices slumped on reports of sooner-than-expected return for
oil production after the attacks.
“Although little details have emerged, speculators are evidently happy to
sell now and ask questions later. And who would blame them after that big
(price) gap?”
The spike in the oil price had stoked fears that costlier energy and
geopolitical instability could weigh on an already slowing global economy,
but a quick recovery in Saudi exports and a return to earlier price levels
would alleviate those concerns.
“Arguably Monday’s spike in oil was unsustainable, since oversupply
concerns have been the much more dominant theme this year, but the sudden
drop came earlier and quicker than expected,” said Chris Beauchamp, chief
market analyst at online trading firm IG.
Traders were nervously awaiting a further response from the United States
after it said Iran was likely to blame.
US Secretary of State Mike Pompeo was due to fly to Saudi Arabia to
discuss possible retaliation after US officials claimed they had proof the
weekend attacks had originated in Iran.
The crisis revived fears of a conflict in the tinderbox Gulf region and
raised questions about the security of crude fields in the world’s top
exporter Saudi Arabia as well as other producers.
US President Donald Trump has said he is ready to help Riyadh following
the strikes but would await a “definitive” determination on who was
responsible.
Iran-backed Huthi rebels in Yemen claimed responsibility but Washington
and Riyadh have accused Tehran, which denies the accusations.
Iran’s supreme leader on Tuesday ruled out negotiations with the US “at
any level,” as tensions mounted between the arch-foes.
Ayatollah Ali Khamenei said the United States had adopted a policy of
“maximum pressure” on Iran because it believes it cannot bring the Islamic
Republic to its knees through other means.
The attack on Saudi oil facilities also took attention away from the
upcoming trade talks between China and the US, as well as a much-anticipated
policy meeting of the Federal Reserve, which is expected to cut interest
rates Wednesday.
Europe’s leading stock markets finished the day mixed, while Wall Street
popped into positive territory late Tuesday after a largely flat trading day
ahead of the Fed’s decision on interest rates.
– Key figures around 2100 GMT –
Brent North Sea crude: DOWN $4.47 at $64.55 per barrel
West Texas Intermediate: DOWN $3.56 at $59.34 per barrel
New York – Dow: UP 0.1 percent at 27,110.80 (close)
New York – S&P 500: UP 0.3 percent at 3,005.70 (close)
New York – Nasdaq: UP 0.4 percent at 8,186.02 (close)
London – FTSE 100: DOWN less than 0.1 percent at 7,320.40 points (close)
Frankfurt – DAX 30: DOWN less than 0.1 percent at 12,372.61 (close)
Paris – CAC 40: UP 0.2 percent at 5,615.51 (close)
EURO STOXX 50: UP 0.1 percent at 3,521.26 (close)
Tokyo – Nikkei 225: UP 0.1 percent at 22,001.32 (close)
Hong Kong – Hang Seng: DOWN 1.2 percent at 26,790.24 (close)
Shanghai – Composite: DOWN 1.7 percent at 2,978.12 (close)
Euro/dollar: UP at $1.1071 from $1.1002 at 2300 GMT
Dollar/yen: UP at 108.13 yen from 108.10 yen
Pound/dollar: UP at $1.2497 from $1.2424
Euro/pound: UP at 88.57 pence from 88.56 pence