Oil surges as Saudi attack focuses market on supply risks

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(FILES) In this file photo taken on March 12, 2019 a pump jack at an oil extraction site is pictured in Cotulla, Texas. - President Donald Trump announced on September 15, 2019 that he has authorized the release of oil from US strategic reserves after drone attacks cut Saudi Arabia's crude production by half. (Photo by Loren ELLIOTT / AFP)

Oil surges as Saudi attack focuses market on supply risks

(FILES) In this file photo taken on March 12, 2019 a pump jack at an oil extraction site is pictured in Cotulla, Texas. – President Donald Trump announced on September 15, 2019 that he has authorized the release of oil from US strategic reserves after drone attacks cut Saudi Arabia’s crude production by half. (Photo by Loren ELLIOTT / AFP)

Oil surges as Saudi attack focuses market on supply risks

 

Oil prices surged on Monday, with Brent crude posting its biggest intra-day percentage gain since the start of the Gulf War in 1991, after an attack on Saudi Arabian oil facilities on Saturday shut in the equivalent of 5 per cent of global supply.

Benchmark Brent crude futures rose by as much as 19.5pc to $71.95 per barrel, the biggest intra-day jump since Jan. 14, 1991. The front-month contract was at $66.20 per barrel, up $5.98, or 9.9pc, from their previous close, at by 0343 GMT.

US West Texas Intermediate (WTI) futures climbed by as much as 15.5pc to $63.34 a barrel, the biggest intra-day percentage gain since June 22, 1998. The front-month contract was at $59.73 a barrel, up $4.88, or 8.9pc, at 0343 GMT.

Saudi Arabia is the world’s biggest oil exporter and the attack on the state-owned producer Saudi Aramco’s processing facilities at Abqaiq and Khurais has cut output by 5.7 million barrels per day. The company has not given a timeline for the resumption of full output.

A source close to the matter told Reuters the return to full oil capacity could take “weeks, not days”. Saudi Arabia’s oil exports will continue as normal this week as the kingdom taps into stocks from its large storage facilities, an industry source briefed on the developments told Reuters on Sunday.

“How the United States and Saudi Arabia deal with the situation will be closely watched,” said Margaret Yang, market analyst at CMC Markets in Singapore.

“If higher oil prices are here to stay, Asia’s oil reliant economies such as China, Japan, India, South Korea and the Philippines will start to feel the pain as higher energy and raw material prices add on the cost burden,” Yang added.

US President Donald Trump said he approved the release of oil from the US Strategic Petroleum Reserve (SPR) if needed in a quantity to be determined due to the attack.

The attack on plants in the heartland of Saudi Arabia’s oil industry, including the world’s biggest petroleum-processing facility at Abqaiq, came from the direction of Iran, and cruise missiles may have been used, according to a senior US official. Initial reports indicated the attack came from Yemen.

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