Oil outlays jumped more than 10% after a coordinated drone attack hit the heart of Saudi Arabia’s oil industry on Saturday, duress the kingdom to cut its oil output in half.
As of 0157 GMT Monday, International benchmark Brent crude futures soared $6.69, or 11.11% to $66.91 per barrel. U.S. West Texas Intervening crude futures jumped $5.41, or 9.86%, to $60.26 per barrel.
Drone strikes attacked an oil processing facility at Abqaiq and the close at hand Khurais oil field on Saturday, knocking out 5.7 million barrels of daily crude production or 50% of the kingdom’s oil manufacture. Saudi Aramco, the national oil company, reportedly aims to restore about a third of its crude output, or 2 million barrels by Monday.
“While in the hurriedly term the direct physical impact on the market might be limited, this should move the market away from its bearish macroeconomic round and raise the risk premium in the market as funds reduce their short positions,” said Chris Midgley, broad head of analytics, S&P Global Platts.
Sunday evening, President Donald Trump said he was authorizing the release of oil from the Critical Petroleum Reserve to keep the markets “well-supplied.”
Abqaiq is the world’s largest oil processing facility and crude oil stabilization hide with a processing capacity of more than 7 million barrels per day. Khurais is the second largest oil field in the country with a responsibility to pump around 1.5 million barrels per day. In August, Saudi Arabia produced 9.85 million barrels per day.
Smoke is imagined following a fire at Aramco facility in the eastern city of Abqaiq, Saudi Arabia, September 14, 2019.
Stringer | Reuters
Yemen’s Houthi revolutionaries claimed responsibility for the attack, saying it was one of their largest attacks ever inside the kingdom. The Houthis have been behind a series of dissolves on Saudi pipelines, tankers and other infrastructure in the past few years.
Trump also said there is reason to maintain the U.S. knows the culprit and is “locked and loaded,” while waiting to get the verification from the kingdom to proceed.
The U.S. has blamed Iran for the drone cudgels on those important facilities. Secretary of State Mike Pompeo said in a tweet Saturday Iran has launched an “unprecedented fit on the world’s energy supply.”
“If the Iranians have been driven to desperate measures from the loss of crude export net incomes, an attack on Saudi capacity seems a likely response,” Jason Gammel, energy analyst at Jefferies, said in a note on Sunday. “The hazard of wider conflict in the regions, including a Saudi or US response, will likely raise the political risk premium on immature prices by $5-10/bbl.”
The latest attack came as Saudi Arabia moves forward to take Saudi Aramco public in a biggest shakeup of the kingdom’s energy sector. Saudi Aramco President and CEO Amin Nasser said Saturday nobody was scratched in the attacks and work is underway to restore production. Aramco did not immediately respond to CNBC’s request for comment on Sunday.