Crude oil prices have risen sharply after Iran’s missile strike on Iraqi airbases housing US soldiers in the wee hours of Wednesday morning as Tehran’s ‘revenge’ for the killing of Iranian Quds Commander General Qassem Soleimani. Fear of instability in the Middle East and disruption of oil flows were behind the price rise.
Despite the rise in crude oil prices, Saudi Aramco’s shares opened at its lowest levels. Aramco’s shares have been slumping since its record-breaking stock market debut on December 9, and its trading peak on December 16 a week later. The fall in stock prices reflects various investors worries that Saudi Oil facilities could become another target of Tehran’s revenge for General Soleimani’s killing after the Iraqi airbases due to it’s close ties to the US.
The concerns are valid. Saudi’s oil rigs had earlier been targeted on September 14, 2019. Drones attacked Aramco owned oil rigs at Abqaiq and Khurais in eastern Saudi. The attack led to a shutdown of the facilities and damaged global output by about 5 per cent as per various international media reports.
However, despite investor fears, Aramco stands to gain the most out of the price rise in Crude oil.
Aramco was forced to shut its facilities due to the drone attacks and consequent fire on September 14. However, it recovered rapidly and within a week it’s output was only a fraction less than it’s normal output. Multiple news agencies reported that the company produced 8 million barrels a day as compared to it’s usual 10 million.
An Iranian-US conflict could lead to a possible cut in oil production in both US and Iran. Saudi’s close ties to US guarantee US and Western protection from various Iranian attacks. Even if Amraco’s rigs were attacked, it has also proven its capacity to bounce back.
Saudi Aramco is currently the world’s biggest exporter of oil, producing 10 per cent of the world global supply, according to Reuters. The country also dominates other OPEC members in production. It led the organisation in planned exports cuts following a meeting in Vienna in December 2019. OPEC and its allies have been cutting production since 2017 to maintain oil prices, as reported by various international agencies. Aramco has already benefitted earlier in 2019 after US tightened sanctions on both Iran and Venezuela after both countries slashed their oil production.
Aramco also has strategic investments in the largest oil field in Texas, US, and has planned investments in China, and with India’s BPCL. Aramco acts a key crude oil supplier to India, China, Japan, South Korea, Taiwan, and the Philippines. It is also valued as the world's most valuable company.
(With inputs from agencies)