Today’s Key Market Drivers: 16th September 2019
Drone Attacks cut global oil production by 5% and Saudi production by 50%.
As expected, safe-haven currencies along with the Canadian Dollar have gapped up this morning following the weekend drone attacks on Saudi Arabia’s largest oil production facilities.
Reports are that the attacks have dented global oil production by 5% with Saudi Arabia’s capacity to produce its daily oil quota cut by 50%. On Sunday afternoon the Saudi’s said they will have 30% of its damaged oil production facility back online but confirmation of this is sketchy.
Stock indexes gapped down on the fear of political contagion with the USA blaming Iran for supplying the Yemen Houthi Rebels with the weapons and guiding the drones onto the Saudi Oil fields.
The USA is going to support Saudi Arabia and I would expect in coming days to see a lift in the sanctions on Iran which may keep financial markets in a cautious mood. Trump said on Sunday that the US believes it knows the culprit and they are locked and loaded and are waiting for the Saudi’s to confirm who was behind the attack. I would be surprised is financial markets continued their bullish run early this week.
Trump authorises the release of more oil if required.
The USA is willing and able to meet the drop-in oil supply and President Trump has approved agencies to expedite the approval process to open pipelines across Texas if needed. Following Trump’s tweet, Oil futures and safe-haven currencies paired some of their gains but still remain above Friday’s closing prices.
The key to this dispute derailing the recent stock market rally and fall on safe-haven assets will come down to how severe the retaliation is from the Saudi’s and whether the USA gets directly involved. I would think it will be highly likely there will be strikes against Iran who are believed to have been behind supplying and guiding the drones. The possibility of US lead military strikes on Iran is likely going to keep the buying activity to a minimum.
A huge week of economic data lies ahead.
Approximately every 8 to 10 weeks we will have one week of economic data that is chock full of high impacting news and Central Bank reports. That week is here with no less than 4 major Central Bank and Inflation reports, official GDP and unemployment figures as well as key industrial and manufacturing figures from China and the USA. Add to this the Saudi Drone Attacks and the volatility will be at a premium this week.
BHP also gaps up as the ASX opens for business Monday.
The share price of BHP gapped up $2.25 cents following the Saudi Drone attack but has since pulled back about $1.00 in the first hour of trading. It’s often referred to as a big mining company but BHP also has significant links to the Oil and gas industry. It currently operates oil and gas facilities in Western Australia and Victoria with offshore oil and gas platforms in Bass Strait and the North West Shelf. BHP recently committed over $1 Billion Dollars to petroleum ventures and its share price is likely going to benefit it Oil prices rise in coming days and weeks.
In case you missed it.
If you missed Episode #5 of Money Exchange here is a link to Friday’s show.
In other news.
China will release its latest Industrial Production and Retail Sales numbers today which have the potential to shift the Yuan and Aussie Dollar by up to 20 ticks. The data would need to be out of line with expectation and given the current focus on the Saudi Arabia drone attacks traders may have other larger issues on their minds and let this one go through to the keeper. The data is released at midday AEST.
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About the Author: Andrew Barnett
Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular keynote speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).
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