Remember that Little Bombing Incident in Saudi Arabia?

Last month, two of Saudi Aramco’s oil production plants were attacked with a combination of twenty-five drones and missiles.  The sites hit, the Abqaiq and Khurais oil facilities, impacted Saudi production by 5.7 million barrels per day of crude [1].

This disruption in supply caused Brent Crude Oil prices to spike approximately 20%, given that this was the biggest one-day disruption to global oil output in history [2].

However, this spike in Brent Crude prices, as well as in the corresponding West Texas Intermediate indices, was short-lived.

Given the significant current supply of oil production, prices have returned to their level before the strike, essentially eliminating its impact on global crude pricing.

WTI Crude Oil Outlook

The price distribution below shows the crude oil spot price on October 15, 2019 and predicted crude oil prices based on option and futures markets.  The blue lines are within one standard deviation (σ) of the mean, and the red lines are within two standard deviations.

Based on the October 15, 2019 prices, the markets indicate that in mid-November there is a 68% chance that oil prices will be between $47.50 and $59.50 per barrel.  Likewise, there is about a 95% chance that prices will be between $40.50 and $72.50.  In mid-February 2020, the +/- 1σ price range is $43.50 to $65.00 per barrel, and the 2σ range is $32.50 to $85.00 per barrel.   In other words, there is a 95% probability that the expected price of oil will be between approximately $32 and $85 per barrel and a 97.5% probability it will not be above $85 per barrel.

Natural Gas Outlook

We can do the same thing for natural gas, which is currently trading at $2.35 per MMBTU on the Henry Hub.  Although more affected by seasonal factors than crude oil, in mid-November 2019, the +/- 1σ price range is $2.15 to $3.15 per barrel (68% probability) and the +/- 2σ range is $1.75 to $4.40 per MMBTU (95% probability).

Key Takeaways

Remember, these option analyses deal in expected probabilities, not certain outcomes—but that doesn’t make it any less useful.  If someone asks you longingly if oil will be at $100 again soon, you now can respond with “there is about a 97.5% probability that oil prices aren’t expected to get above $85 by mid-February 2020, so I wouldn’t count on it.”


[1] CNBC, “Saudi Aramco reveals attack damage at oil production plants,” September 20, 2019,

[2] BBC News, “Oil prices soar after attacks on Saudi facilities,” 17 September 2019,

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