PLENTY OF OIL!

A new oil war is brewing, spiking crude prices and sending stocks spiraling lower thanks to a chaotic weekend in the Middle East.

U.S. officials are blaming Iran for a massive drone strike on Saudi Arabia’s oil facilities that have reportedly knocked out half of the country’s output.

“The production shutdown amounts to a loss of about 5.7 million barrels a day, the kingdom’s national oil company said, roughly 5% of the world’s daily production of crude oil,” The Wall Street Journal reports. “Officials said they hoped to restore production to its regular level of 9.8 million barrels a day by Monday. Energy Minister Prince Abdulaziz bin Salman said lost production would be offset through supplies of oil already on hand.”

Despite these reassurances and President Trump’s pledge to release oil from the Strategic Petroleum Reserve, crude spiked when futures markets opened Sunday night. West Texas Intermediate jumped double-digits and settled in above $60 for the first time since early July. Meanwhile, Brent briefly popped nearly 20%.

“Brent futures soared as much as $11.73 a barrel in intraday trading, the biggest increase since the contract launched in 1988,” Bloomberg reports. “The global benchmark surged as much as 19.48% in percentage terms, the biggest jump since the first Gulf War in 1991.”

Historic Jump

“Brent’s premium to West Texas Intermediate widened as much as 37% to $7.40 a barrel,” Bloomberg continues, “the biggest gap since July.”

Trump attempted to calm the markets by taking to Twitter last night, assuring the world in all-caps that we indeed have PLENTY OF OIL!

The only trouble is the President also appears ready and willing to use military force following the attack, claiming that the U.S. is “locked and loaded” as it attempts to confirm that the perpetrators were indeed an Iranian-backed group.

Donald Tweet

While the president didn’t specifically name Iran in this note, Secretary of State Mike Pompeo has already blamed Iran for the attack, claiming there is “no evidence the attacks came from Yemen,” according to CNN.

We can safely add a conflict with Iran to our list of stock market worries this month. I’ll toss it on the pile with the never-ending trade war, recession fears, and Trump’s battle with the Fed over the direction of our country’s interest rate policy.

This weekend’s drone attack has also raised concerns over Saudi Aramco’s upcoming IPO.

“Saudi Aramco is gearing up for a two-part IPO, in which it hopes to first sell a sliver of itself to investors on the local Saudi exchange, and then list shares internationally,” The WSJ reports. “The listing plans have long been dogged by questions over valuation and the venue for an international stock-market debut.”

As if the Aramco IPO hasn’t dealt with enough trouble recently, the threat of additional attacks might scare off investors just as the world’s largest oil company makes its final push to the market.

Industry analysts expect the Saudis to once again delay the offering — or possibly scrap it entirely. Don’t expect the opportunity to get your hands on Aramco shares anytime soon…

Speaking of IPO disasters, we’re seeing no shortage of busted offerings lately as another unicorn takes a dive.

SmileDirectClub Inc. (NASDAQ: SDC) hit a rough patch almost immediately after its Nasdaq debut.

Shares fell almost 28% Thursday after opening for trade for the first time, reports Bloomberg. The teeth-straightening startup somehow managed to raise $1.35 billion before its IPO to achieve famed “unicorn” status. But the public market doesn’t seem very enthused by the offering. Luckily, shares caught a bid Friday afternoon, gaining double-digits to make up some of Thursday’s losses.

SDC’s debut was this year’s fifth-largest IPO and joins the ranks of a litany of over companies with less than successful strategies for making money, such as Uber and Lyft…

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

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