Black Swan events may cause changes in the crude oil market.
On December 9, the Iraqi Ministry of Defense said that two oil wells in an Iraqi oil field had been hit by a “terrorist attack”. This was followed by a short rally in international crude oil prices, and the Black Swan event may lead to a change in the crude oil market.
On December 9, two bombs were detonated at two oil wells in the Habazz oil field, more than 200 kilometers north of the Iraqi capital, Baghdad, and caused fires in the area. Firefighters are reported to have arrived on the scene and are extinguishing the flames. Iraqi oil officials say the field is producing about 25,000 barrels of oil per day.
Local police were quoted by Iraq’s Shafaqi News Agency as saying that Islamic State (ISIS) terrorists were the perpetrators of the attack on the oil field, and sources say the terrorists planted two explosive devices at the well at dawn local time on September 9. The oil well is located in the southwestern province of Kirkuk, 238 kilometers north of Baghdad. The province is rich in oil and gas resources. The oil field was also reportedly attacked by militants in 2016.
As the news spread, international oil prices fell after a short rally.
Recently, there has been a rising trend of terrorist attacks across Iraq. Crude oil analysts believe that the time small-scale conflict will not develop into a local war, crude oil production off supply low possibility, the market is at most a short term rushing high, sustainability is doubtful; space is mainly concerned about the Persian Gulf, now two events, one is in the Red Sea, the other is near the Kurdish, are far from the core area; production is too small, generally to reach 300,000 barrels per day before Direct impact on supply and demand balance.
In September 2019, after a fire broke out at a Saudi Aramco processing facility critical to global energy supplies following several drone strikes, affecting nearly half of Saudi Arabia’s oil production, oil prices surged 19%, the largest increase in 28 years.
Today, Iraq’s oil fields have also been attacked, but as the fields produce about 25,000 barrels of crude oil per day, they account for about 2% of Iraq’s production and two tenths of a percent of global production.
In addition, changes in the international crude oil market will largely depend on the economic impact of the Wuhan pneumonia outbreak.
It is also worth paying attention to the game of OPEC+ countries. In the beginning of this year, Wuhan pneumonia outbreak in the world, oil oversupply intensified, oil prices opened a round of plunge market, down to a historical low of $ 20 / barrel. 21 April, May delivery of WTI oil prices actually fell into the negative, to – $ 37.63 settlement price shocked global investors.
As oil prices plummeted, oil-producing countries announced production cuts. Subsequently, oil prices opened a round of rebound quotes, WTI oil prices from a low of $6.5 all the way through the $20, $30, $40 barrier, has risen to $46 a line, Brent crude oil is approaching the $50 mark.
On December 3, OPEC+ reached an agreement to increase production slightly, adjusting the scale of production cuts from 7.7 million barrels per day to 7.2 million barrels per day in January 2021, with a small increase of 500,000 barrels per day, and adjusting production every month thereafter according to market conditions, with a range of up to 500,000 barrels per day.
Glossary of Terms
The Black Swan Event is a European belief that all swans were white prior to the discovery of Australia, but this European belief collapsed with the appearance of the first black swan. The existence of a black swan represents a major, unpredictable and rare event that is unexpected and yet changes everything. A black swan event is something that people are blind to, and used to interpreting these unexpected shocks with limited life experience. When unpredictable events occur, people tend to panic and overreact to them. This emotion is reflected at the economic level by excessive pessimism about the economic outlook, and at the capital market level by overshooting the capital markets. This is how black swan events amplify the reaction of capital markets.
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