Pipeline POP

While the globe and oil prices are on pins and needles over the outcome of U.S. China trade talks, an outage at Saudi Arabia’s biggest oil field may further squeeze global heavy oil supply. Saudi Aramco’s is the largest offshore oilfield in the world, with a capacity of more than 1 million barrels per day. It is possible, according to some reports, that it could be running at significantly reduced rates.

MarketWatch reported that “Saudi Aramco halted oil output this week at Safaniyah, the world's largest offshore oilfield, Energy Intelligence reported Thursday, citing sources familiar with the matter, according to a tweet from Amena Bakr, a senior correspondent at the news and research service provider. Further information was only available through subscription-based Energy Intelligence. The potential impact on oil prices depends on how long output at the oilfield is down, said Phil Flynn, senior market analyst at Price Futures Group. "The thinking is that the field produces heavy crude, and the world is short of that [type of] oil." “The unplanned shutdown takes out another 1 million barrels a day of heavy oil from the market, Alex Schindelar, executive editor of content & strategy at Energy Intelligence Group tweeted Thursday, adding that the heavy crude oil market was already tight because of the OPEC output cuts and U.S. sanctions on both Iran and Venezuela.”

Reuters is reporting the offshore oilfield down after the main power cable was cut by a vessel’s anchor, a source familiar with the matter said on Friday. The shutdown occurred about two weeks ago, the source said, and it was not immediately clear when the field would be back at full capacity. Still the fact that this oil may be lost for weeks is juicing prices. Oil products like heating oil and RBOB are in breakout mode as the tighter supply realities start to sink in. U.S. and China demand numbers continue to be strong during the trade war. It should soar if there is a deal. The charts look like we are in a breakout mode and the only thing that might stop the rally is a breakdown of U.S. China talks. I have very happy hedgers.

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