Energy Report: Snap Attack

Oil prices are snapping back on news of another Houthi attack on a Saudi oil facility during a weekend where geopolitical risk factors for oil are rising. 

Oil prices, which were floundering on the night session, rallied after Reuters reported Yemen’s Iran-aligned Houthi movement said on Monday it had fired 17 drones and two ballistic missiles at Saudi targets, including towards Saudi Aramco refineries in Jubail and Jeddah. There was no immediate Saudi confirmation.

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Yet that is not the only geopolitical risk factor that could move the range-bound oil market. Iran blames Israel for a power outage. Reuters reports that “Iran blames regional arch-foe Israel for a sabotage incident at its key Natanz nuclear site and will exact revenge, state TV quoted its foreign minister as saying, in what appeared to be the latest episode in a long-running covert war. Reuters says that Iran’s semi-official Nour news website said the person who caused an electricity outage in one of the production halls at the underground uranium enrichment plant had been identified. “Necessary measures are being taken to arrest this person,” the website reported, without giving details about the person. The incident occurred amid diplomatic efforts by Iran and the United States to revive Tehran’s 2015 nuclear deal with major powers, an accord Israel fiercely opposed, after former U.S. President Donald Trump abandoned it three years ago.

Last week, Iran and the global powers held what they described as “constructive” talks to salvage the deal, which has unraveled as Iran has breached its limits on sensitive uranium enrichment since Trump reimposed harsh sanctions on Tehran. Iranian authorities described the incident a day earlier as an act of “nuclear terrorism” and said Tehran reserved the right to act against the perpetrators, according to Reuters.

In the meantime, oil demand signals are rising and OPEC plus still seems to be ready to withhold supply. Strong compliance to the OPEC plus cuts seems to suggest the inventories will still tighten.

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