The Aramco attacks caught us off guard
The rollercoaster ride really began on Sept. 14, when drones attacked an oil processing facility owned by Aramco, the state-owned oil company in Saudi Arabia. The fires took hours to extinguish, and parts of the facility had to be shut down for repairs. Considering Aramco accounts for 5% of the world’s oil production, this was major news. Thankfully, America’s new-found energy independence prevented the crisis from having a major effect on American consumers.
Here we go again
Then, on Oct. 11, a Saudi oil tanker in the Red Sea was struck twice by what is assumed to have been missiles. This most recent strike caused Brent Crude Oil prices to rise 2.4% and West Texas Intermediate to rise 2.2%. The global market is trying to remain optimistic by hoping no full-fledged military conflict will arise from these two incidents. So far OPEC and OPEC+ (i.e., non-OPEC member countries that are bound by an agreement with OPEC) are holding to their agreement to limit oil output.
Close to home and far away
Closer to home and also farther away comes a new chapter in the U.S./China trade war. Monday, Oct. 14, Brent Crude Prices dropped 2.1% and West Texas Intermediate dropped 2% when the Trump administration announced phase one of a trade deal with China. Phase one has China scaling its annual purchase on U.S. farm goods, such as soybeans, pork and wheat, from $40 billion to $50 billion over two years. They would also agree to certain intellectual property measures and concessions related to financial services and currency. In return, the United States would delay planned tariff increases scheduled for November.
Keep your hands and feet inside, the ride isn’t over
This trade dispute with China has been pushing oil prices down due to fears it will create a global recession. If Trump suddenly announces a full-blown trade deal with China, and he has been known for making surprising revelations, all global market assumptions will be useless. Instead of a global recession, we could find ourselves in global economic growth. Only time will tell. Just keep holding on; it is likely the bumpy ride is not over yet.