Brazilian Agency Believes Attack on Saudi Arabia Will Value Upcoming Pre-Salt Auction

RIO DE JANEIRO, BRAZIL – Décio Oddone, general director of the National Agency of Petroleum, Natural Gas, and Biofuels (ANP), believes that the attack made by drones last Saturday, September 14th, on oil plants in Saudi Arabia will increase the interest of foreign companies in the sector in participating in oil auctions in Brazil, scheduled for the months of October and November.

“It increases the risk perception in the oil market, which should be reflected in prices, even after the full resumption of Saudi supply, which values the pre-salt and the other Brazilian assets,” said Oddone, through a note released yesterday, September 16th.

The attack also has impacts on the financial market, according to the Chief Economist of Daycoval Asset Management, Rafael Cardoso. “On the broader and more uncertain side, [the attack] will lead to increased geopolitical tension in the region. In relation to the global economic impacts, there is a rise in the price of oil, as is already happening, but it should not continue due to the upturn in Saudi production in the coming months or the increase in supply by other participants [from the Organization of Petroleum Exporting Countries – OPEC].

In the economist’s opinion, if there is high inflation in the countries, it should be temporary until the normalization of oil supply in a global context. “In this regard, there should be little implications for the central banks’ decision to reduce interest rates, given the temporary shock.”

Cardoso said that the temporary increase in prices, followed by normalization, as well as the absence of implications on monetary policy, are also valid for the national scenario, where “the Central Bank is in the midst of a downward cycle of the (basic interest) SELIC rate”.

The IBOVESPA Index, of B3 (former São Paulo Stock Exchange), closed the day up 0.17 percent, with 103,680 points. Petrobras preferred shares (Petrobras PN N2) were the most traded shares in the session and were up 4.39 percent. The common shares of the state-owned company (Petrobras ON N2) also closed up 4.52 percent.

Attack by drones

Saudi Arabia announced that an Aramco pipeline running through the country was attacked by armed drones on Saturday by terrorist organizations, among them the Houthi militia, supported by Iran. Following the Saudi announcement, the Houthis took responsibility for the attacks.

According to Saudi Arabia’s Minister of Energy, Abdulaziz bin Salman, the attack has led to a reduction in the country’s daily oil production of around 5.7 million barrels. The amount corresponds to approximately five percent of the global supply.

The attacks had an impact on the oil price in the world market. The Brent index surpassed US$71 (R$284) per barrel, just after the opening of Monday’s trading session in London, which represents a price more than 18 percent over that of last week.

The announcement that the United States could release its strategic oil reserves helped contain the hike in prices, but future oil prices in key markets remain approximately ten percent higher than the previous week.

On Twitter, US President Donald Trump said his government is ready to react to attacks on oil facilities in Saudi Arabia.

Source: Agência Brasil