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31FX Blog

Commodities – Week Review With Oil

September 16-20, 2019 – Here’s a full rundown on what happened this week with Oil, starting from Saudi Arabia’s oil getting attacked, as U.S points their finger to Iran.

Saudi Arabia Attacked, U.S Points Finger To Iran

The attack on Saudi Arabia’s plant, which accounts for 5% of global oil supplies and a facility, took 5.7 million barrels a day of production off line for a few days. It has also highlighted the vulnerability of the sprawling processing plants, pipelines and refineries of the Persian Gulf.

US Secretary of State Mike Pompeo claims over the weekend that Iran was responsible for the attack. Pompeo said there was no evidence that the weapons were launched in Yemen and accused Iran about the attack.

WTI 58.555 63.003 444.8 BRENT 59.619 67.644 802.5

Oil Prices Close 15% Higher On Record Trading Day

(Source: Planet Labs Inc.)

Saudi Arabia lost 5.7 million barrels per day of production after the Abqaiq facility was attacked on Saturday, shuttering more than half of the country’s oil production. Brent briefly surged by more than $11 per barrel at one point during intraday trading on Monday, the increase in the benchmark’s history dating back to 1988.

Abqaiq is a critical oil processing facility in Saudi Arabia, a choke point that has no easy workaround. The facility does not make press headlines, but oil experts have long been aware of its critical importance – and vulnerability.

“For the oil market if not global economy, Abqaiq is the single most valuable piece of real estate in planet earth. A successful attack on Abqaiq would be akin to a massive heart attack for the oil market and global economy,” Bob McNally of the Rapidan Energy Group said in a statement.

The big question is how long Abqaiq will see operational disruptions. Extensive damage to a unique facility with unique equipment will take weeks or months to repair, analysts say.

WTI 58.451 63.148 469.7 BRENT 63.893 68.778 488.5

Saudi Oil Attacks Came From Southwest Iran, U.S. Official Says, Raising Tensions

The United States believed the attacks that crippled Saudi Arabian oil facilities last weekend originated in southwestern Iran, U.S. official told an assessment that further increases tension in the Middle East.

Three officials said the attacks involved both cruise missiles and drones, indicating that they involved a higher degree of complexity and sophistication than initially thought.

Iran on the other hand denies involvement in the strikes. Iran’s allies in Yemen’s civil war, the Houthi movement, claimed responsibility for the attacks. The Houthis say they struck the plants with drones, some of which were powered by jet engines.

U.S. President Donald Trump on Monday said it looked as if Iran – which has a long history of friction with neighbor Saudi Arabia – was behind the attacks.

But in a sign that U.S. allies remain unconvinced, French Foreign Minister Jean-Yves Le Drian said he was unsure if anyone had any evidence to say whether drones “came from one place or another.”

Saudi Arabia sought to reassure markets after the attack on Saturday halved oil output, saying on Tuesday that full production would be restored by month’s end.

WTI 58.420 62.244 382.4 BRENT 65.109 68.073 296.4

Oil Down on Stockpile Build; Saudi Worries Limit Losses

Oil prices fell on Wednesday after the first U.S. inventory build in four weeks, but losses were kept in check on news that the United States was seeking to build a coalition of European and Arab partners to deter Iran after an attack on Saudi Arabia.

Crude prices also fell after President Donald Trump said he ordered the Treasury Department to “substantially increase” sanctions on Iran, showing he was still not inclined to call for a military strike against Tehran.

WTI and Brent have been on a wild ride this week, surging nearly 15% each on Monday before tumbling about 6% or more in the next session. The volatility came as traders tried to come to grips with Saturday’s aerial hit on Saudi Arabia’s Abqaiq crude processing complex and Khurais oil field, which cut the kingdom’s output by half and daily world oil supply by 5%.Total U.S. crude production remained at 12.4 million barrels per day last week.

WTI 62.389 58.167 422.1 BRENT 68.140 62.785 535.5

Oil Rises on Saudi Supply Scramble, Blame Game Over Attack

Oil prices ended higher Thursday as Saudi Arabia tapped other oil-producing nations to ensure no default in its fuel delivery to customers.

Saudi Arabia’s state-owned Aramco was scouring global fuel markets for cargoes in the wake of the unprecedented attacks on its oil facilities, Bloomberg reported. It said Saudi Arabia purchased diesel cargoes and also sought one-off supplies of aviation fuel this week, according to the report.

Thursday’s rally in oil was also driven by saber-rattling by Iran, the United States and Saudi over responsibility for the attack and the likely response.

WTI 57.867 59.345 147.8
BRENT 62.665 64.737 207.2

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