Crude oil price increase after plant attack in Saudi Arabia – National

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An attack on a major oil plant in Saudi Arabia pushed crude oil prices up sharply on Monday, although its long-term impact depends on how long production is interrupted and what the attack is on this weekend presages for the future.

US crude rose by $ 5.61 per barrel, or 10.2%, to $ 60.46 a barrel in e-commerce on the New York Mercantile Exchange. The Brent crude, the international standard, rose by $ 7.84 a barrel, or 13%, to $ 68.06 a barrel.

The Iranian Houthi rebels backed by Iran have claimed responsibility for the attack on the Saudi Arabian facility of Aramco, the largest oil processing plant in Saudi Arabia. It blocked the production of 5.7 million barrels of crude oil per day, more than half of Saudi Arabia's global daily exports and more than 5% of the daily production of crude oil. Most of the output goes to Asia.

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"Reducing Saudi oil production by 50% is shocking," said Jonathan Aronson, research analyst at Cornerstone Macro.

The attack could increase anxiety over the stability of world oil reserves. "Saudi Arabia has been a reliable oil supplier in the world," said Jim Burkhard, head of crude oil research for IHS Markit. This attack is "adding a geopolitical premium to the price of oil". This means that oil prices would rise due to concerns over the disturbances affecting supply. The rise in oil prices tends to damage the economy with rising consumer costs.

Work is underway to restore production at the Abquaiq plant. The Wall Street Journal reported Sunday that Saudi officials reported that one-third of crude oil production will be restored on Monday, but that it could bring the entire online plant weeks back. Officials said they would use other existing facilities and supplies to supplant plant production.

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The richest countries in the world have oil reserves of over 2 billion barrels, but the release of those to alleviate supply problems could potentially backfire and result in higher prices on the market as traders fear that there is a problem with a limited offer, he said.

While the United States has amortization because both Canada and both produce a lot, leaving the United States less dependent on oil from the Middle East, it is still a global market. "If you remove oil from any part of the system, this affects everyone," Burkhard said.

However, the situation today is better than it would have been a decade ago, before the US energy boom.

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If the plant comes back online and there is no fundamental change in world oil supply, prices could rise and remain higher because traders will build a "safety premium," said Michael Lynch, president of Strategic Energy & Economic Research.

It is feared that the global oil supply will be more insecure and more attacks may occur. And in a world already worried about supply, the impact of another attack could mean a strong effect on prices, said Kevin Book, managing director of Clearview Energy Partners. "It's almost like an open season for a big attack."

There is also the potential for the attack on Saudi Arabia's oil infrastructure that could lead to a military strike against Iran in retaliation, Book said. Countries that attach to each other structures and oil fields are a "prescription for a high price of oil". He maintains that the attack on Saudi Arabia will help world markets finally recognize the repercussions of the break-up of the Iranian nuclear agreement, from which President Donald Trump withdrew the United States in 2018, imposing harsh sanctions Iran, including its oil industry.

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