Market Update: Oil prices are up after attack on Saudi Arabian oil facilities
Market update: Oil prices are up after attack on Saudi Arabian oil facilities
Over the weekend, Saudi Arabian oil infrastructure was attacked by drones and around 5 mio. barrels per day of crude oil production has been disrupted. The volume corresponds to around 5% of the total global oil production and therefore oil prices are heavily affected this morning – Brent increased to currently $65.3, The oil price jump is the biggest intra-day gain since 1991 when the Gulf War started.
In addition to the supply disruption in Saudi Arabia, also the geopolitical risk premium is increasing as comments from the U.S. yesterday both blamed Iran for the drone attack and said that the U.S. was “locked and loaded” for some kind of retaliation for the drone attack. Fears are also that some kind of Saudi Arabian counter-attack could take place - so far the Houthi rebels in Yemen claimed the attack, but according to the U.S. and Saudi Arabia it remains uncertain if this is the case. Both parties blame Iran.
Both the U.S. and Saudi Arabia will likely release some of their emergency oil reserves to avoid shortage of oil, which could limit the oil price increase somewhat.
So far it seems like the markets are still finding their feet after the huge disruption. Note, should the situation develop further, we could see even higher oil prices. Also, the continued elevated prices will depend on the speed with which Saudi Arabia brings the world's largest oil production facilities back online.
Expect a highly volatile day.