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AFP
London
Oil prices sank five percent on Tuesday, reversing some of the previous day’s gains as analysts predicted Saudi output would recover sooner than expected after weekend drone attacks.
In the space of several minutes in afternoon European trading, North Sea Brent crude oil for delivery in November tumbled from $67.75 to $65.00. It fell as low as $64.24, before recovering somewhat.
The market was already trading in negative territory after the previous day’s record gains that were fuelled by attacks on Saudi facilities which wiped out half the kingdom’s crude output.
“The markets were once again wrong-footed by the Saudi news,” said Forex.com analyst Fawad Razaqzada in reaction to Tuesday’s price drop.
“This time prices slumped on reports of sooner-than-expected return for oil production after the attacks.
“Although little details have emerged, speculators are evidently happy to sell now and ask questions later. And who would blame them after that big (price) gap?”
The spike in the oil price had stoked fears that costlier energy and geopolitical instability could weigh on an already slowing global economy, but a quick recovery in Saudi exports and a return to earlier price levels would alleviate those concerns.
“Arguably Monday’s spike in oil was unsustainable, since oversupply concerns have been the much more dominant theme this year, but the sudden drop came earlier and quicker than expected,” said Chris Beauchamp, chief market analyst at online trading firm IG.
Traders were meanwhile nervously awaiting a further response from the United States after it said Iran was likely to blame.
The crisis revived fears of a conflict in the tinderbox Gulf region and raised questions about the security of crude fields in the world’s top exporter Saudi Arabia as well as other producers.
“Oil’s reversal didn’t do much for the global markets. The indices remain concerned over what happens next between Saudi Arabia and Iran, fears that helped to undermine sentiment,” said Spreadex analyst Connor Campbell.
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18/09/2019
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