The fragile state of geopolitics in the Middle East was ruptured this week with reports of an Iranian oil tanker under attack in the Red Sea.

The impact on oil prices was instant and in Friday trading, Brent crude was priced just below US$60 with WTI (West Texas Intermediate) holding around US$54 a barrel.

The missile attack on the Iranian owned Suezmax tanker Sabiti is reported to have happened in the Red Sea near Jeddah in Saudi Arabia.

Two hits

Iranian media says the tanker suffered two hits causing an explosion, but no injuries to crew.

Prices spiked on the news, trading at their highest since the day in mid-September when Saudi Arabian oil facilities were attacked.

While production from Saudi Arabia is back after the September attacks, production numbers for September were down 660,000 barrels a day.

It’s estimated that the Kingdom lost about US$2 billion in production after the attacks when output fell by around 1.3 million barrels a day temporarily.

While the market worries if Saudi Arabia can get back to full capacity, the senior oil leaders in the country say it’s the top priority with the Saudi Aramco CEO, Amin Nasser saying this week at the Oil and Money conference, that the most urgent work was restoration of production, adding “it was expedited and completed”.

Nigeria pumped an estimated 1.866 million barrels a day in August despite being formally included in the production reduction agreement in January this year.

The country is now reported to be looking at a quota of 1.774 for the rest of the year, up from 1.685 as was previously agreed.

Nigeria was not initially included in the quota because of unrest and sabotage to pipelines, but recent new production has come on board and the new minister for petroleum resources, Timipre Sylva pledged stronger compliance.

Speculation on OPEC

The market is speculating that OPEC and friends might cut production further when ministers of this wider body meet in early December. 

Speaking at the Oil and Money conference in London, the OPEC Secretary General, Mohammad Barkindo said that “all options” are open and his words were taken as a positive sentiment for oil prices, when he said the December meeting would deliver “decisions that will set us on the path of heightened and sustained stability for 2020”.

Ministers will have many opportunities to meet informally before the December gathering, and we can expect a lobbying effort in the coming months, but as always, OPEC’s decision must be unanimous, so the market will have to wait until the end of the meeting for the news. The charter now in place commits the 24-country group to keeping 1.2 million barrels a day off the market until March 2020.

The leaders of Russia and Saudi Arabia will meet next week to discuss trade, investment, and cooperation.

Putin in Saudi

President Vladimir Putin will visit Saudi Arabia and is scheduled to meet with King Salman bin Abdulaziz Al Saud as well as with the Crown Prince Mohammed bin Salman.

A statement from the Kremlin said that the OPEC+ agreement would be on the agenda. Russia has been a keen supporter of the Declaration of Cooperation for the last three years and Saudi Arabia as well as OPEC will want that to continue.

The usual challenges weigh heavy on the oil market this week with an uncertain economic climate and excess supply of oil on the market.

In this month’s oil market report, OPEC revised its global oil demand, down about 40,000 from last month to 980,000 barrels a day.

This week’s added geopolitical complication will have market nervous about any escalation of conflict in the near future.