Nifty99000 100%

Sensex99000 100%


Saudi oil attack: India may get a crude jolt

Author: Arpit Chandna/Wednesday, September 18, 2019/Categories: Exclusive

Rate this article:
Saudi oil attack: India may get a crude jolt

Global crude oil market opened 19% higher on Monday, its biggest intraday jump in 28 years. The prices skyrocketed after a drone attack at Saudi Aramco’s most important processing plant on Saturday which had wiped out nearly 5% of the global crude oil supplies.

Following the attack, US President Donald Trump on Sunday stated that the US was "locked and loaded" for a potential response to the attack on Saudi Arabia's oil facilities. The Trump administration believes Houthi rebels backed by Iran was behind the attack. Iranian foreign ministry dismissed this as “pointless”.

The attack further deteriorated the already soured relations between the US and Iran. Following the attack, Saudi officials reported an output decline by 5.7 million bpd which totaled around 5% of global crude oil supplies. The US had opened the strategic oil reserves to fill in the shortfall in the global crude supplies. Saudi Arabia also suggested withdrawals from its reserve crude stocks which stood at 188 million bbl in June to compensate for the attack.

The market is currently waiting for Saudi Aramco's update which would provide extends of supply outage. Saudi Aramco has not mentioned any fixed timeline for the resumption of supplies but indicated that achieving full capacity could take weeks.

Goldman Sachs believes if the supply outrage continues even for a shorter duration of 1-2 week, it could result in risk of premiums growing higher and price rice of $3-$5/ bbl. The prices could be higher by $10-$15/bbl if it continues for 3-6 weeks. If it extends for over three months, Brent prices could stay well above $75/bbl which will make the US shale players boost their drilling activity in response to supply deficit.

Currently, the global markets are vulnerable to surge in crude oil prices as it comes at a time when the markets are already witnessing weak economic outlook due to the ongoing US and China trade war.

How it impacts India?

Saudi Arabia is India's second largest supplier of crude and cooking gas. India imports 83% of its crude requirement, the third biggest importer of oil globally. Data shows that India had imported 4.5 million barrels a day during April-July period. In an interview to a TV channel, RBI governor Shaktikanta Das said the attack on Saudi Arabia's important oil facilities will have a bearing on India's current account and fiscal deficit if oil prices continue to surge. As per the recent government data, India's trade deficit stood at $13.45 billion in August. The Indian rupee could be the biggest causality among the world currencies. On Monday, the Indian rupee declined 68 paise to 71.60 against the greenback amid concerns that the crude oil prices will surge in the days to come. Further, petroleum prices in India could see a spike on the back of surge in global prices. (The author is a fundamental research analyst at Karvy Comtrade Limited)


Number of views (2578)/Comments (0)

Leave a comment

Add comment



Ask the Finapolis.

I'm not a robot
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above



The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free