Saudi oil strikes to drive up risk premium in crude market - S&P Global Platts

Commenting on the weekend attack on the Saudi Arabian oil and gas facilities and its impact on the oil markets, Chris Midgley, Global Head of Analytics at S&P Global Platts, said attacks on Saudi oil plants have boosted concerns about supply security in the Middle East and should raise the risk premium in the global crude market, per Reuters.

Key Quotes:

“The sudden change in geopolitical risk warrants not only an elimination of the $5-10 a barrel discount on bearish sentiment, but adds a potential $5-10 a barrel premium to account for now-undeniably high Middle Eastern dangers to supply and the sudden elimination of spare capacity.” 

“As such prices are likely to break out of the current $55-65 a barrel options range, to test the high $70s as currently supported by fundamentals.”

Yemen’s Houthi group claimed responsibility for Saturday’s attacks that knocked out more than half of Saudi oil output, or more than 5% of global supply.