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BHP, Woodside and Santos shares all jump as oil prices surge

Oil prices have soared following a drone attack on a key oil processing facility in Saudi Arabia over the weekend. WTI +11% and Brent +12%.

A chaotic weekend at a glance

Following drone attacks that struck at the heart of Saudi Arabia’s oil operations; when the markets opened in Australia this morning, oil and oil stocks both soared.

All up, the dual attack saw the operations of Saudi Arabia’s world-class Abqaiq processing facility and the Khurais oil fields disrupted.

For reference, the Abqaiq facility is the largest oil processing facility in the world: with the capacity to process over 7 million barrels of oil per day.

We witnessed a multitude of consequences in response to these unsettling events:

For one, Saudi Arabia’s stock market dropped approximately 2.3% on Sunday GMT+3.

Temporarily at least, Saudi Arabia noted that production would be cut by 50%. All up, this would take roughly 5 million barrels per day out of the global supply equation – a figure that equates to approximately 5% of global oil production.

Oil prices surge

As IG’s Market Analyst, Kyle Rodda tweeted this morning – though at one point oil prices had rallied as much as 20%, pledges from US President Donald Trump to tap into emergency oil reserves looks to have eased trader panic as the day has progressed.

Here, Trump noted that the US would take measures ‘to keep the market well supplied.’

Even with such assurances, price action remained incredibly bullish.

A little after 10:00 AEST, WTI had reached $60.97/bbl (+11.22%) while Brent Crude climbed $7.72 to hit $67.97/bbl (+12.81%).

BHP, Woodside and Santos share prices rise

The impact of this oil price spike on some of Australia’s key oil stocks was immediately apparent.

In the first 30-minutes after the market opened, we saw the BHP Billiton Ltd (ASX: BHP) share price rise 3.77%, Woodside Petroleum Ltd (ASX: WPL) surge 6.7% and the Santos Ltd share price (ASX: STO) gain a massive 7.85%.

BHP’s shares have been a mixed performer this year, rising just 14% in that period – even as iron ore prices have hit five-year highs.

By comparison, today’s run-up in oil prices has helped Santos consolidate already strong gains for the year.

Following impressive first-half results, which saw Santos post strong revenue, earnings and dividend figures, the energy company’s year-to-date share price rise of 46% is hardly surprising.

Final thoughts

Lastly and in addition to Trump’s plan to ensure the supply-side of the market remains ‘well supplied’; Bloomberg this morning reported that:

‘Saudi Arabia will probably restore almost half the oil production lost after this weekend’s devastating drone strike as early as tomorrow.’

With all this considered, it will be interesting to see if the bullishness surrounding the oil price and oil stocks can be maintained.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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