(Bloomberg) – Saudi Aramco jumped the most since April 2023 on Sunday as the Iran war entered its second week, prompting supply disruptions that may send oil prices higher when global markets reopen.
Map of the Strait of Hormuz. (Map Source: Global Energy Infrastructure.)
Shares of the state-backed oil giant climbed as much as 4.9% in Riyadh before paring gains to close up 4.1%, on the first day of trading for the stock since Brent crude prices topped $90 a barrel on Friday.
Brent, the global benchmark, may climb further in the days ahead after the United Arab Emirates and Kuwait started reducing oil production amid a near-closure of the vital Strait of Hormuz waterway, adding to interruptions affecting worldwide energy supply and exports.
“For Aramco, we believe that the gain in oil prices would offset a decline in exports,” said Junaid Ansari, head of research and strategy at Kamco Investment Co. “We also believe that Aramco should be able to re-route a bulk of its shipments to the Red Sea. It’s just about logistics and handling the excess capacity.”
Aramco has been redirecting oil cargoes to Red Sea facilities on Saudi Arabia’s west coast to avoid the Strait of Hormuz. Already, eight supertankers have loaded from the area this month, putting shipments on course for a record, according to tanker-tracking data compiled by Bloomberg.
Last week, the state oil producer raised the price of its main oil grade for buyers in Asia for April by the most since August 2022 amid the turmoil in the Middle East.
Saudi Arabia, the UAE, Kuwait and Bahrain said they intercepted Iranian attacks overnight into Sunday, even after the Islamic Republic’s president said he had instructed the military not to target any nation that isn’t striking his country. A senior Iranian official later said Tehran has the right to hit states hosting U.S. military bases.
Prior to the weekend’s developments, several traders warned that oil prices could reach $100 within days — unless there was some de-escalation of hostilities or change to constraints in the Strait of Hormuz, which handles about a fifth of the world’s energy exports.
Aramco, the world’s largest oil producer, saw more of its fields under attack over the weekend. Drones were intercepted at Shaybah near the Abu Dhabi border, while there was minor damage at the company’s Berri site after an attack on Saturday, Bloomberg reported.
The two fields have a combined capacity of about 1.5 MMbpd. Aramco’s Ras Tanura refinery, Saudi Arabia’s largest, was forced to halt operations last week following a drone strike in the area.
Aramco is currently slated to report earnings on March 10.
