Aramco Fire Fuelled ASX Energy Stocks; United States SPR to Rebalance the Supply Chain?

  • Sep 17, 2019 AEST
  • Team Kalkine
Aramco Fire Fuelled ASX Energy Stocks; United States SPR to Rebalance the Supply Chain?

Crude oil prices spiked substantially in the international market after a recent drone attack on Saudi’s biggest oil-exporting state-owned Aramco, forcing the company to shut the oil-producing facilities, which further propelled the ASX-listed energy stocks.

Aramco Event

Saudi Arabia’s Aramco crude processing facilities at Abqaiq and Khurais curbed the output by over 5 million barrels a day post the attack, which propelled the crude oil prices in the global market. The crude oil posted its highest intraday gain on 16 September 2019 since the Gulf war in 1991. The benchmark, Brent oil future CFD witnessed a large runaway gap up of over 13.50 per cent on 16 September 2019.

After a massive production loss, the energy investors are largely eyeing the crude oil market to see if the event could turn out to be a foundation stone for the strong fundamentals.

Saudi Arabia had recently decided to curb its production by 1.2 per cent of the total global demand, and the Aramco event further intensified the loss in global production.

Read Here: S&P/ASX 200 Energy Recovers as New Saudi Oil Minister Sticks to the Production Curb

The United States, again stepped in to halt the price gain, and the United States President Donald Trump allowed the use of the strategic petroleum reserve of the nation, which in turn, exerted tremendous pressure on the oil prices and the prices retraced back to trade at US$64.83 (Day’s low on 16 September 2019).

However, the prices recovered sharply during the evening session today amid a high speculative buy over the production loss to reach at US$69.65 (at 03:00 AM AEST) The Brent oil future CFD is currently trading at US$68.10 (as on 17 September 2019 12:18 PM AEST).

The United States Crude Oil SPR

US Crude Oil SPR

(Source: EIA)

The United States is maintaining a high strategic petroleum reserve from quite some time, which could allow the nation to keep the oil market well supplied in the time of supply chain disturbance. In recent the times, the United States had kept the exports high, which could further increase in the coming weeks ahead to mitigate the supply risk.

US Crude Oil

The strategic petroleum reserve in the United States stood at 644.8 million barrels for the week ended 06 September 2019.

The Exports

The Exports

The oil exports from the United States surpassed its previous peak of 3,292 thousand barrels a day (for the week ended 19 July 2019) and stood at 3,295k barrels a day for the week ended 06 September 2019.

The exports from the United States is already high amid the higher domestic production and coupled with the SPR; the nation holds the potential of balancing the supply shortage in the global market.

Domestic Production

The domestic production of crude oil in the United States stood at 12,082k barrels a day (June 2019), down by 0.3 per cent from the production level of 12,115k barrels a day in May 2019; however, the domestic production remained 13.5 per cent higher on a yearly basis.

The higher domestic production coupled with higher exports could rebalance the global oil market again, and investors should dig out for more such fundamentals before jumping into any long or short in the oil market ahead.

Domestic Production of crude oil

Energy Indices

ASX listed energy players spiked over the sudden increase in crude oil prices and led the index to post an intraday gain of over 5.85 per cent from its day’s low of 10583.50 on 16 September 2019. The S&P/ ASX 200 Energy Index is currently trading at 11,101.80 (as on 17 September 2019 12:48 PM AEST), up by over 0.86 per cent from its previous close of 11,006.30.

Not just the domestic index the global S&P Commodity Producers Oil & Gas Exploration & Production Index also surged to post a single day jump of over 8.32 per cent on 16 September 2019 from its last settled value of 685.4541.

ASX Energy Stocks

Woodside Petroleum Limited (ASX: WPL) witnessed a gap-up opening of over 7.94 per cent on 16 September 2019. The stock rose significantly to register a high of A$33.840. However, the share price of the company lost its early gain during the day’s session on 16 September 2019.

WPL started the session today on a positive note and is currently trading at A$33.295 (as on 17 September 2019 01:37 PM AEST).

Also Read: Global LNG Supply Glut Prompts ASX-Listed Oil & Gas Explorers To Play The Volume Game

Oil Search Limited (ASX: OSH)

OSH witnessed a gap-up opening of over 6.47 per cent on 16 September 2019 to start the session at A$7.730, and the shares of the company rose to register a high of A$7.780 (as on 16 September 2019).

OSH continued yesterday’s momentum and started the day’s session on a strong note, with stock price crossing the previous day’s high of A$7.780 to mark a high of A$7.850 (as on 17 September 2019 10:00 AM AEST).

Beach Energy Limited (ASX: BPT)

BPT witnessed a gap-up opening of almost 8 per cent on 16 September 2019 and the stock rose to register a high of A$2.790 (as on 16 September 2019).

However, the shares of the company are now trading lower and are presently exchanging hands at A$2.670 (as on 17 September 2019 02:14 PM AEST).

Santos Limited (ASX: STO)

STO witnessed a gap-up opening of almost 8 per cent on 16 September 2019 to register a high of A$8.040 (Day’s high on 16 September 2019).

However, the stock soon lost the black lustre and fell on ASX to presently trade at A$7.800 (as on 17 September 2019 02:17 PM AEST).

Origin Energy Limited (ASX: ORG)

In comparison to other energy stocks, ORG stock witnessed a muted gap-up of just 2.72 per cent on 16 September 2019; however, the stock rose to mark a day’s high of A$8.060, up by over 4.8 per cent on 16 September 2019. ORG quickly lost the day’s gain post hitting the level of A$8.060 during the post lunch session.

ORG is currently trading muted at A$7.970 (as on 17 September 2019 02:10 PM AEST).

Also Read: Origin’s Australian Pacific LNG Copious Shell-Off Fanned Dividend Expectations Among Investors

Many other oil and gas explorers on ASX followed the same trajectory and witnessed a gap-up opening on 16 September 2019.

However, these oil and gas explorers are now losing their early gains, and investors should dig out more for the reason of the fall before entering any long or short in the market.

Also Read: ASX-Listed Energy Stocks to Relish Over Improved Crude Oil Figures; SXY and BID Eyeing Domestic Opportunities

To wrap up, the attack on Aramco oil processing facilities promoted the company to curb the production by over 5 million barrels a day leading to sudden spike in crude oil prices.

The crude oil price surge enticed the investors’ interest in energy players in the global market, leading to gain across all the major energy stocks and indices.

However, the United States stance to open the strategic petroleum reserve soon curbed the crude oil prices in the evening session yesterday, but the oil prices managed to recover over the speculation of a production shortage.

The ASX-listed oil and gas explorers or producers are now losing the charm, and the entrance of the United States SPR into the supply chain might be a possible reason. But investors should dig out for more information before entering into the sector.

To Know More, Do Read: EIA Forecast Brings More Shock Waves For ASX-listed Oil & Gas Explorers


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