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The uncertain oil market landscape after the Saudi attacks

Illustration: Sarah Grillo/Axios

Analysts and traders are looking at the immediate supply effect of the Saudi attacks and what they portend for the long-term security of the world's largest crude oil exporter.

Why it matters: Prices had been middling for months thanks to the sluggish global economy, U.S. production growth and trade fights. But the attacks could keep prices in a higher band for a while, even though there's enough crude sloshing around to prevent shortfalls for now and the wider economic landscape remains bearish.

What they're saying: Barclays, in a note this morning, points out that Saudi exports "will likely not be impacted significantly" thanks to their large stockpiles. That includes 4 main Aramco export terminals that hold roughly 2 weeks' worth of shipments.

Yes, but: Lower inventories and spare production capacity put upward pressure on prices, and more broadly, "market expectations of supply-side tail risks will likely reset," Barclays writes.

  • "[T]he attack on critical Saudi oil infrastructure calls into question the reliability of supplies from not just one of the largest net exporters of crude oil and petroleum products but also the country that holds most of the world's spare production capacity."
  • "This, coupled with a heightened geopolitical risk premium as investors assess the probability of a re-negotiated Iran nuclear deal, will likely provide a more lasting boost to oil prices in our view."

Of note: S&P Global Platts analyst Chris Midgley points out:

  • "While in the short term the direct physical impact on the market might be limited, this should move the market away from its bearish macroeconomic cycle and raise the risk premium in the market as funds reduce their short positions."

Go deeper: Oil price spikes expected after attacks on Saudi facilities