International Oil Prices Surge After Attack on Saudi Arabia’s Largest Oil Plant

The Oil prices surged on Monday after hitting their highest since May at the open, due to fears over supply disruptions following an attack on Saudi Arabia’s oil facilities on Saturday that cut more than 5% of global oil supply.

Benchmark Brent crude futures rose by as much as 19.5 percent to US$ 71.95 per barrel, the biggest intra-day jump since the start of the Gulf War in 1991. The front-month contract was at US$66.20 per barrel, up US$5.98, or 9.9 percent, from their previous close, at 8:43 AM PST.

US West Texas Intermediate (WTI) futures climbed by as much as 15.5 percent to US$63.34 a barrel, the biggest intra-day percentage gain since June 22, 1998. The front-month contract was at US$59.73 a barrel, up US$4.88, or 8.9 percent, at 8:43 AM.

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.

Prices eased off their peaks after U.S. President Donald Trump said that he approved the release of oil from the U.S. Strategic Petroleum Reserve (SPR) if needed in a quantity to be determined due to the attack on Saudi Arabia’s facilities.

State oil giant Saudi Aramco said that the attack cut output by 5.7 million barrels per day, at a time when Aramco is trying to ready itself for what is expected to be the world’s largest share sale.

Aramco gave no timeline for output resumption. A source close to the matter told Reuters that 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 on Sunday.

The attack on plants in the heartland of Saudi Arabia’s oil industry, including the world’s biggest petroleum-processing facility, came from the direction of Iran, and cruise missiles may have been used, according to a senior U.S. official. Trump also said that the United States was locked and loaded for a potential response to the attack on Saudi Arabia’s oil facilities.

Bad News for Pakistan

The petrol prices for the month of September were slashed by Rs. 4.59 by the government. After the new developments in the International markets, the government might increase the petrol prices for the next month as the oil prices have surged upwards after the Saudi incident.

Almost after every change in the oil prices is because of fluctuations in global petroleum and crude oil prices, claims the government. The consumers are the ones who are mostly affected by the rise. At times, it is the international crude oil that makes an impact while at other time it is the variation in dollar as well.

According to market analysts, the rising oil prices can be a bad news for Pakistan. The State Bank is expected to announce the Monetary Policy today. The analysts remarked that, if the international oil prices touch $75-85 in the coming period, they’ll see another interest rate hike in the next Monetary Policy announcement.

This is going to be damaging for Pakistan’s fragile economy. Oil price increase will let in a new round of ‘imported inflation’ and its impact on balance-of-payments can potentially wipe out last year’s gains in import reduction, said an analyst.

Source: Pro Pakistani