Aramco shares rise amid rising oil prices and regional tensions

The Iran war has entered its second week, prompting supply disruptions that may send oil prices higher. Amid this backdrop, Saudi Aramco shares climbed as much as 4.9% in Riyadh on the first day of trading since Brent crude prices topped $90 a barrel.

Recent Developments

Brent crude rose to $80 per barrel after a drone strike hit the Aramco Ras Tanura refinery, one of the largest refineries in the Middle East with a processing capacity of about 550,000 barrels of oil per day. The strike, carried out by an Iranian-made Shahed-136 drone, caused a small fire that was quickly brought under control.

In response to the drone strike, Saudi Aramco temporarily halted operations at the Ras Tanura refinery to assess potential damage. Iranian officials characterized the response as a ‘crushing’ retaliation with ‘no red lines’.

Following the drone strike, Saudi Arabia, the UAE, Kuwait, and Bahrain intercepted Iranian attacks overnight into Sunday. Goldman Sachs Group Inc. cautioned that Aramco’s capacity to redirect oil cargoes may be limited, although the company has been redirecting oil cargoes to Red Sea facilities to avoid the Strait of Hormuz.

Despite the challenges, Junaid Ansari stated, “For Aramco, we believe that the gain in oil prices would offset a decline in exports.” He also noted, “We also believe that Aramco should be able to re-route a bulk of its shipments to the Red Sea. It’s just about logistics and handling the excess capacity.” The combined capacity of the Shaybah and Berri fields is about 1.5 million barrels a day.

Observers suggest that oil prices could reach $100 within days unless there is a de-escalation of hostilities in the region. The price of Aramco’s main oil grade for buyers in Asia was raised for April by the most since August 2022, indicating a bullish outlook amid rising tensions.

Details remain unconfirmed regarding the full impact of the drone strike on Aramco’s operations and the broader implications for oil supply in the region.