Stocks were lower today after a crazy packed weekend which included drone strikes, labor strikes at General Motors and the WSU Cougars going undefeated by beating the Cougars of Houston. At the close today the Dow was off 142 at 27,076 on mixed trading volume. The 12 best performing stocks were all oil companies and the worst performers were refining and transportation stocks like Alaska Air and Delta.
All eyes are on the Middle East after a Saturday drone strike in Saudi Arabia in which 10 to 12 drones buzzed over the desert and knocked out half of all oil production for the House of Saud. The big worry here is a war between Saudi Arabia and Iran which the US is blaming for the attack. While Iran says it was not involved, Iranian backed Houthis rebels in Yemen claimed they were behind the attack. Several gurus however noted that It took several hours for the rebels to announce their involvement which is not their normal operating procedure and suggests outside influence. The big loser in this mess could be China since they get half their imported oil from Saudi Arabia. The big winner could be the US which will work with Saudi Arabia to restore operations plus step into the supply gap with WTI crude and might even sell a few weapons on the side as Saudi Arabia looks to defend itself against future drone strikes. Saudi Arabia said it should have production back by Monday but some gurus poo-poo this noting that it could take much longer and that prices might reach $100 per barrel in the interim. Saudi Arabia supplies 10% of the world’s oil and this attack effectively took 5% of global supply off the table. WTI crude finished the day up 12% or $6.80 per barrel to $61.64. Several gurus noted that since the US is now a major oil producer a spike in prices will not cause a recession since consumers paying more at the pump will be partly offset by oil companies making big bucks in export markets. This will however push up the price of plastics and other items made from petroleum.