Dow futures pointed to heavy losses at Monday’s opening bell after a devastating drone attack on Saudi oil production infrastructure shocked the global energy market.
Dow Futures Dive Nearly 150 Points
US stock futures careened lower when trading opened on Sunday night. Dow Jones Industrial Average futures fell 134 points or 0.49%, implying losses of 138.52 points in the DJIA.
S&P 500 futures fell 0.47%, and Nasdaq futures declined 0.69% as the mood turned bearish on Wall Street.
Saudi Oil Field Attack Will Hurt US Consumers – But Not the Economy
Dow futures recoiled to the news that drone attacks had decimated Saudi Arabian oil production. US Secretary of State Mike Pompeo blames Iran for the attacks, which wiped out 5.7 million barrels of daily production, and Aramco – the Saudi national oil company – is racing to mitigate those losses.
According to the Wall Street Journal, Aramco aims to restore one-third of the lost oil production by Monday. However, it could take weeks to return all 15 damaged production facilities back to full capacity.
Ryan Kellogg, an economist at the University of Chicago, said that the Saudi oil production cuts should have a limited impact on the US economy as a whole since it should be a boon to energy production stateside.
“Ten years ago you’d say unambiguously, if there’s a supply shock in the Persian Gulf, this would clearly be a net negative for the U.S.,” Kellogg said. “Now it’s much more of a wash than it used to be.”
Shortly before futures trading began, President Trump tweeted that he had authorized the release of oil from the Strategic Petroleum Reserve “if needed…to keep the markets well-supplied.”
….sufficient to keep the markets well-supplied. I have also informed all appropriate agencies to expedite approvals of the oil pipelines currently in the permitting process in Texas and various other States.
The lingering economic impact of the drone attack also adds another bullet point to the Federal Reserve’s agenda at its upcoming policy meeting. The US central bank is overwhelmingly expected to reduce its interest rate target by 25 basis points, though the stock market’s recent rally had caused the probability of the Fed maintaining its current target to rise above 20% last week.
The Dow has climbed for a remarkable eight consecutive sessions, but gains petered out as the indexed crawled closer to setting a new all-time high. On Friday, the index added 37.07 points to close at 27,219.52 – just 179.16 points below its July 16 peak.