Oil Soars on Supply Disruption Fears

Oil

Oil prices kicked off the week on a price gap higher following the attacks on Aramco's oil facility over the weekend. The facility is considered the world's biggest petroleum-processing facility. The incident removed half of the country's production and almost all spare capacity. The attack is said to cut 5.7 million barrels per day which is more than 5% of the world supply. OPEC members will use their spare capacity to cover the disruption, and Trump offered the release of oil from the Strategic Petroleum Reserve to keep markets well-supplied. The West Texas Intermediate crude futures and Brent futures are currently hovering near $59 and $65, respectively, after testing a four-month high at the open. Oil benchmarks surrendered partial gains following headlines that Aramco will be able to restore production in the coming days. Oil markets will remain vulnerable to any headlines concerning the recovery of production, and the response of the Kingdom of Saudi Arabia to the incident.

USD

The dollar index, which measures the greenback against a basket of major currencies rose to 98.21 as investors rushed to dollar safety following the incident on the weekend. Major US stock-index futures started the week on a gap lower and the US 10-year yields dipped to 1.86% signaling flow to the bond market amid increased risks. On the other hand, market participants are looking forward to the Federal Open Market Committee meeting this week. The market widely expects the Fed to cut interest rates by 25 basis points responding to the growing downside risks to the economy.

Metals

Gold prices started the week on a stronger note as investors were seen fleeing risky assets and rushing to safety. The incident that took place in the Kingdom of Saudi Arabia on the weekend could lead to further escalation in the geopolitical tension in the Gulf region. The precious metal is considered investors' haven during times of high market risks and uncertainty. The price of a gold ounce advanced to $1512, the price of a silver ounce rose to $17.97, and palladium soared to a record high of $1623.

Major Economic Events

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