Oil prices witnessed a sharp rise over the weekend after Saudi Arabia’s oil facilities were attacked during pre-dawn hours on Saturday. The attacks eliminated more than half of the crude output from the world’s largest exporter.
Drone attacks claimed by Yemen’s Houthi rebels erupted fires at two major Saudi Aramco oil facilities, according to Aljazeera. The sources told Reuters that 5 million barrels a day of crude production were impacted, disrupting half of the Company’s oil output or 5% of the global oil supply.
Following the attacks, the Brent Crude jumped from USD 60.22 on Friday to USD 69.05 on Monday, while the WTI Crude jumped from USD 54.85 to USD USD 62.76 during the same period.
However, on Tuesday, the Saudi Arabian Energy minister Prince Abdulaziz bin Salman said that the country’s oil supply levels were back to the same levels they were prior to the attacks. Additionally, he also noted that country’s oil market will be fully back online at the end of September.
Bin Salman urged international powers to take action against the attack on the global economy and energy markets.
Following Bin Salman remarks, oil prices dropped by over 5% intraday on Tuesday.
British Prime Minister Boris Johnson and Germany’s Chancellor Angela Merkel discussed the attacks and agreed they need to work together on a collective response, according to Downing Street.
Despite Yemen rebels claiming responsibility for the attacks, U.S. President Donald Trump has blamed Iran for the strike. Saudi Arabian officials said they were continuing investigations to determine the origin of the attacks.
However, French officials mentioned that it had not seen any proof that the attacks were carried out by Iran. French Foreign Minister Jean-Yves Le Drian told reporters that France has not seen any strong evidence of where the drones originated from.
While bin Salman mentioned that oil production output levels stabilized, analysts had mixed responses towards a possible spike in oil prices and inflation.
“I’m not sure the global economy is in a state where it’s going to be able to absorb [higher oil prices] if [they] stay elevated,” said Peter Boockvar, Chief Investment Officer at Bleakley Advisory Group, according to CNN.
On the other hand, Eagle Asset Management analysts believe that the oil spike prices are going to be short lived.
“If you’re doing speculative oil trades based on commodity prices, I think it’s a fool’s trade and I would be very reticent to do that. Oil is not going to USD 100. The oil dynamics are not the dynamics of our youth and show. … We do not have the same sort of shock in directionally higher rates in oil prices. This will be a very short-term phenomena just because of the massive capacity that has been built in both domestically and other players,” said James Camp, Managing Director at Eagle Asset Management, according to CNBC.
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