Sep 17, 2019

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Good morning and welcome back. Today's Smart Brevity: 1,091 words, ~ 4 minutes.

I joined Axios' Dan Primack on his Pro Rata podcast to talk about the attacks against Saudi oil infrastructure. Listen here.

Finally, RIP to Ric Ocasek of The Cars, who open today's edition with impeccable and moving craftsmanship...

1 big thing: All eyes on the new Saudi oil boss

Prince Abdulaziz bin Salman at the World Energy Congress Sept. 9. Photo: Karim Sahib/AFP/Getty Images

Saudi energy officials are expected to give a key update today after Saturday's strikes on vital oil infrastructure, which halted almost 6 million barrels per day of production, or 5% of global daily output.

What's new: The new Saudi energy minister Prince Abdulaziz bin Salman is slated to hold what will be a closely watched press conference at 8:15pm (1:15pm ET).

The big question: How much lost output has been restored, and how long it will take for revival of full supplies from OPEC's most powerful producer and the world's largest crude oil exporter?

Where it stands: Bloomberg reports that it could take months to restore full capacity at the massive Abqaib oil processing facility, 1 of 2 major sites hit. The other was the big Khurais oilfield.

What they're saying: Energy analyst Robin Mills, writing in the Asia Times, explains one reason why the attack against Abqaib were so remarkable.

  • He notes it's heavily guarded and had "easily repelled" an al-Qaeda vehicle attack in 2006. Yet it proved highly vulnerable to an aerial attack from drones or missiles.
  • "And it questions the wisdom of concentrating so much processing capacity in one place, however fortified," Mills notes.

The big picture: Axios Markets editor Dion Rabouin looks at the financial fallout from the attacks that sent crude oil prices surging. The effects go well beyond oil trading, noting just about every market was moved by the attack and fears or hopes of how it could reprice assets.

These include, per Dion:

  • Stock prices fell, with the Dow, S&P and Nasdaq all ending the day lower. Airlines were hit hard as JetBlue and United Airlines both fell nearly 3% while American Airlines dropped 7.3%.
  • Energy stocks, on the other hand, had their best day of the year, with the S&P Oil & Gas Production ETF jumping almost 11%, and the S&P energy sector rising out of a bear market with its best session of 2019.
  • Yields on the benchmark 10-year Treasury note fell by the most in 3 weeks, as traders sought safe haven U.S. government debt.
  • Rising gasoline prices as the crude increase moves through the system could further increase inflation, which is already seeing a pickup thanks to the tariffs in the U.S.-China trade war and rising U.S. wages.
2. Why a prolonged Saudi crude loss spooks markets
Expand chart
Data: U.S. exports from EIA. Saudi Arabia exports from IEA; Chart: Axios Visuals

Generate readers know well that the U.S. is now the world's largest crude oil producer at over 12 million barrels per day.

But, but, but: One of the reasons why the attacks against Saudi infrastructure are such a big deal is that the kingdom is the world's largest exporter of crude oil.

Check out the chart above, which shows that while U.S. exports have grown a lot since a de facto export ban ended in late 2015, they're still far below Saudi levels.

The big picture: It's a global market. A major supply loss anywhere affects prices everywhere — especially one that comes from a violent attack, which adds a further risk premium.

What's next: In the U.S., the firm GasBuddy expects average gasoline prices to rise by 15-30 cents per gallon as higher prices reverberate through the fuel system.

3. Oil market response to the attacks
Expand chart
Data: FactSet; Chart: Axios Visuals

Oil prices remain far higher in the wake of Saturday's attacks and today they're bouncing around as traders await more word on the scope of the damage and the U.S. response.

The big picture: Per MarketWatch, WTI gained 15% yesterday at settlement, its largest daily jump since 2008. It eased slightly later in the day.

  • This morning, Brent crude was trading around $66.74 and WTI was $62.04.

Where it stands: President Trump has sent mixed signals, my colleague David Lawler writes in the Axios World newsletter yesterday.

  • Trump has said it’s “looking” like Iran was responsible and the U.S. is “locked and loaded.” But he also pointed out he’d prefer to avoid military conflict and wants to get a variety of expert assessments before attributing blame.
4. 2019 is very warm so far

It has been a hot summer and a hot year on planet Earth.

Driving the news: The National Oceanic and Atmospheric Administration said Monday that July–August was the 2nd-warmest in modern temperature records that date back to 1880.

  • And data for January–August also released yesterday shows it was the 3rd-warmest in those modern temperature records.

Why it matters: It underscores the long-term, human-induced planetary warming trend.

  • Zeke Hausfather of the research group Berkeley Earth said via Twitter that the group sees a 90% chance that 2019 will end as the second-warmest on record.

By the numbers: The June–August average temperature was 1.67°F above the 20th century average of 60.1°F, NOAA said.

  • And the year-to-date average was 1.69°F above the 20th century average of 57.3°F — behind only 2016 and 2017, the agency said.

Go deeper: The Northern Hemisphere just had its warmest summer on record (The Washington Post)

* * *

Speaking of climate change ... School districts are debating what position to take after New York City said 1.1 million public school students could skip classes without penalties to join the global youth climate protest Friday, the New York Times reports.

Why it matters: This a test of the movement’s impact — by causing disruptions via school strikes and getting noticed by political leaders who are in NYC for the UN Climate Action Summit 3 days later and the General Assembly meeting that follows it, per NYT.

Go deeper: Axios' Rebecca Falconer has more here.

5. Catch up fast: Exxon, EVs, lobbying, 2020

Oil-and-gas: ExxonMobil yesterday announced another oil discovery off Guyana's coast, where the oil giant says a string of finds shows a total of 6 billion barrels of oil-equivalent of recoverable resources.

  • Why it matters: Exxon is slated to begin initial production early next year in the region that's increasingly important to their global portfolio. It will make Guyana the world's newest major oil producer.
  • Go deeper: Exxon announces new Guyana discovery as first production looms (Houston Chronicle)

Electric cars: "The federal government is requiring automakers to include artificial motor sounds in electric and hybrid cars when traveling at low speeds to alert pedestrians, but it wants to give vehicle owners the ability to choose which sounds they use," The Verge reports.

  • The proposal is an amendment to rules finalized early last year requiring EVs and hybrids to emit noise to prevent injuries, they report.

Lobbying: Via the Washington Examiner, the American Petroleum Institute has launched a 7-figure ad buy that a spokesperson says is designed to "provide balance to the energy debate as Congress returns and the presidential primary continues."

Politics: "At least five high-profile Democrats running for president will not be attending a town hall airing on MSNBC this week focused on climate change — an issue many in the 2020 field count among the most urgent facing the United States and the world," per the Washington Post.

  • Candidates skipping the event include Joe Biden, Elizabeth Warren, Kamala Harris and Beto O'Rourke. Bernie Sanders will participate.
Ben GemanAmy Harder