Saudi Aramco may resume 70% of lost output sooner than expected
US identified Iran location where missiles were launched
It would have been another boring Pre-Fed trading day in the markets, if it wasn't for the Energy space to save the date. Oil experiencing some decent levels of volatility after Saudi announced quicker than expected repairs of damages on key Aramco facility in Abqaiq. Officials are confident that 70% of lost output production will be restored in 2/3 weeks adding that this also "shows the real value of Aramco". Latest comments come on the back of the latest 16% jump in Crude oil on Monday after the a drone strike was carried out on Aramco key facility. Therefore today Oil paired back part of Monday gains but still holding above the key support level of $59. Moreover, later today US sources confirmed that US cruised missile were used in attacks on Aramco facility identifying launching location within Iran borders. Net net, if Aramco earlier than expected resumption of lost output decreases Monday's buying appetite. The confirmation of Iran responsibilities increases the chances of escalation in the region. Therefore, the attention - as for usual - turns to Trump and his intention with respect to military intervention. Either way, Oil remains on the focus for the rest of the week just ahead of the FOMC interest rate meeting tomorrow. Could it get any better?
Turning the attention to tomorrow FOMC interest rate decisions, the target rate probability for a HOLD has increased to 41.2% from 0% of last month. Therefore, is going to be an interesting evening in company of Mr. Powell tomorrow, with the Chair who only has a few members of his board surely in support of a cut tomorrow. The market base case scenario (and also mine) remains for two more cuts this year - in line with the "insurance cut" rhetoric adopted last July. Focus will be on assessment of risk - given recent optimism on trade war - and any hints to policy decision looking into next year.
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