Oil Indicators Upended After Attacks on Saudi Output Facilities

(Bloomberg) -- It’s not just oil futures that are surging on the back of unprecedented attacks on Saudi Arabian production facilities at the weekend: indicators of market tightness, sentiment and refined fuel markets were also upended.

The attacks knocked out about half Saudi Arabia’s current production.

Here’s a run through a handful of other barometers that oil traders watch closely, and how they reacted:

TIME-SPREADS

The first place traders look to see supply tightness is so-called time-spreads. The bigger the premium refineries are willing to pay for immediate barrels, the more acute the perceived short-term shortage. To that end, the difference between Brent futures for this December and next more than doubled to a record. There was also a surge in more immediate spreads.

VOLUMES

Futures trading volumes powered ahead in early trading on Monday. The November contract for Brent, for example, had traded more than 38,000 lots by 12:30pm London time. That was already higher than the full-day volume for that contract in any previous session.

VOLATILITY, SKEWS

After futures prices traded in relatively narrow ranges for the past three months, the weekend’s attack -- along with President Donald Trump’s warning that the U.S. is “locked and loaded depending on verification” that Iran staged the attack -- sent volatility spiraling. Options markets flipped from a bearish bias, or skew, to a bullish one.

WIDER RESONANCE

The impact of the weekend’s attacks was not confined to crude. Nymex gasoline futures climbed as much as 13% on Monday, the biggest percentage gain in two years, as the knock-on effects of the jump in crude prices rippled. The fuel’s premium to crude also surged.

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