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Crude oil Price spikes after attack on Aramco facilities

Crude oil Price spikes after attack on Aramco facilities

Crude oil price spiked by as much as 19.5% as the markets reopened after the weekend attacks on Saudi Arabia’s biggest refinery.

16 September 2019 | SQUARED DIRECT The price of crude spiked on Monday after an attack on Saudi Arabian Aramco’s oil facilities on Saturday shut down about 5-6% of global oil supply.

According to Reuters, Benchmark Brent crude futures rose by as much as 19.5% to $71.95 per barrel and the front-month contract was at $66.20 per barrel, up $5.98, or 9.9%, from their previous close.

Price of WTI surges to a high of $63

U.S. West Texas Intermediate (WTI) futures climbed by as much as 15.5% to $63.34 a barrel and the front-month contract was at $59.73 a barrel, up $4.88, or 8.9%, at 0343 GMT.

Aramco has cut output by 5.7 million barrels per day and did not give a date or timeline for when production will reach full output again. Some experts suggest that resuming full production could take weeks.

However, Saudi Arabia will continue to export oil as normal by covering the loss in production from its large inventory of stored oil. If needed, the U.S is also ready to supply more oil in the market because of the attack with President Donald Trump approving the release of oil from the U.S Strategic Petroleum Reserve.

Following the attack, Saudi Arabia now intents on lessening its economy’s dependence on crude oil exports and plans on buying refined oil products such as gasoline, diesel and fuel oil in significant quantities.

U.S. gasoline futures rose as much 12.9%, while U.S. heating oil futures rose by as much as 10.8%. China’s Shanghai crude oil futures rose to its trading limit, gaining 8% at the open.

The US has accused Iran for the attack and according to a senior US official, cruise missiles may have been used. Damage to the Abqaiq and Khurais facilities appears to be severe. Iran has denied any involvement in the attack.

On Sunday, Iran’s President Hassan Rouhani called for a regional summit to address the attacks on Saudi Arabia and accused Washington of diverting blame for the war in Yemen, where US ally Saudi Arabia leads a military coalition that has regularly carried out air attacks.

With the recent dismissal of John Bolton, market analysts were expecting an easing of US sanctions on Iran but with the recent attack and accusations against it, such hopes are fading away. Oil prices could remain high and even rise more in the short term which could in turn damage economies that are dependent on oil imports.

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