Attack on oil installations may spell a disaster for the region
Crude oil prices rose sharply on Monday, in response to the attack on two oil plants in Saudi Arabia. This halted around 5 percent of worldwide oil production. It will probably take weeks before production is restored.
The price of Brent oil rose in Singapore by a whopping 19 percent to $ 71.95 a barrel. That is the strongest price increase since the Brent contract was launched in 1988. After that the rate fell again. The price of a barrel of American oil increased by 15 percent to $ 63.34 per barrel.
To mitigate the impact of the oil price attack, US President Donald Trump has announced measures. For example, he has given permission to use oil from the country’s strategic reserve, if necessary. That reserve was formed after the oil crisis of 1973. The oil is stored in four underground depots on the Gulf of Mexico in the states of Texas and Louisiana. “More than enough oil!” Trump said on Twitter.
Oil installations in Abqaiq and Khurais were probably hit by several drones on Saturday. Abqaiq’s oil field in the northeast of the country is home to the world’s largest oil refinery. The field in Khurais, between the capital Riyadh and the Persian Gulf, is one of the most important oil fields in the country. Aramco, the world’s largest exporter of crude oil, halved its oil production.
For the oil markets, the acute disruption is the worst ever, surpassing the loss of Kuwaiti and Iraqi oil supplies in August 1990. At the time, Sadam Hussein invaded his neighboring country. It is also greater than the loss of Iranian production during the Islamic Revolution in 1979.
Experts point out that the vulnerability of the Saudi infrastructure, which until now has been considered very stable for the oil markets, is a new reality that traders should take into account.