Attacks on Saudi oil facility impact the oil supply chain
After drone attacks hit Saudi Arabia’s Aramco oil facility in the early hours of Saturday morning, production has halted disrupting the oil supply chain.
The attacks have disrupted the production of “5 [million] barrels a day”, which is a loss of “5% of the global production”, resulting in an increased oil price. When markets opened on Monday morning the price of oil had increased to $72 per barrel, an increase of 20%. However, after the announcement from the US Government on Monday, that they would release some of their oil reserves in order to make up the shortfall, the price of oil dropped slightly to $66.
On Tuesday the Saudi Energy Minister, Prince Abdulaziz bin Salman, announced that oil production at the facility “will be back to normal by the end of September”. This came alongside an announcement from President Trump that “it was no longer necessary to release reserves from US emergency stocks”. Both these announcements have led to the price of oil falling to $64.4 per barrel but with growing political tensions in the Middle East, it remains to be seen how this attack will have a long-term effect on the price and supply of oil.
USMCA promises streamlined shipments and customs
Formally known as NAFTA, the new US-Mexico-Canada agreement (USMCA) would help create streamlined cross-border shipments and customs if the current deal passes through the Governments of all countries involved.
Referring to Chapter 7 of the agreement, attendees at the CSCMP Edge conference in Anaheim, California, were told that the deal would create “uniformity for supply chains across North America”. According to Brent Connor, senior counsel at Thomas Hine, the provisions set out in the deal allow goods to be shipped across all three borders in a border control system that “would function similarly to the European Union”.
The news of greater efficiency is welcomed after long delays on the US-Mexico border due to “a bridge closing to commercial traffic” after “border personnel were reassigned to handle migration”. However, with Mexico being the only nation “that has so far passed the trade deal”, supply chain professionals wait to see if the deal will be approved by the other nations.
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General Motors strike costs $100 Million a day in lost production
As General Motors staff strike, the company could be set to lose anything “from $50 million to $100 million per day” from the loss of production according to analysts.
The strike which began on Monday saw 50,000 General Motors employees walk out leading to the closure of 31 of the company’s factories. Analysts believe that the company, which is the US’ fourth largest car manufacturer, has “enough cash on hand to ride-out a short-term strike” after the company had a few years with strong sales growth. With the strike not yet affecting the supply of their cars as General Motors still “have enough vehicles in stock – but only for a week”, the company may “only suffer “nominal” damage” but a prolonged strike may see the company’s shares fall.
At this point in time the effects of the strike on the supply of General Motors cars can not be calculated, however the longer the strike goes on and production is halted, the bigger the impact will be on the supply of these cars.
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Have a lovely weekend!