Oil price jumps after drone attack on Saudi facilities

Oil investment

The price of oil surged to more than $70 a barrel last night after the attack on two oil facilities in Saudi Arabia.

Brent crude rose 18 per cent to $70.97 and West Texas Intermediate jumped 12 per cent to $61.50 in one of the biggest moves in oil markets in years.

Analysts believe that the attack on two oilfields in Saudi Arabia may harm the flotation of Saudi Aramco, the state-controlled oil giant.

They also predicted that oil could hit $100 a barrel, throwing world energy markets into disarray if supply is significantly reduced as a result of the attacks on Abqaiq, the world’s largest oil processing facility, and the Khurais oilfield. The damage, thought to have been caused by drones, cut production by half and disrupted the daily global oil supply by up to 5 per cent.

S&P Global Platts estimated that Brent crude, the international benchmark, could surge by $5 or $10. It closed at $60.22 a barrel on Friday. Analysts said the impact on its producer, Saudi Aramco, would be negative. Ayham Kamel, an analyst with Eurasia Group, said: “The attacks could complicate Aramco’s initial public offering plans given rising security risks.”

Yemen’s Houthi rebels have claimed responsibility for the attacks but Mike Pompeo, the US secretary of state, blamed Iran.

The Saudi government had hoped to raise $100 billion based on a $2 trillion valuation. Prince Abdulaziz bin Salman, the Saudi energy minister, said 5.7 million barrels a day of crude and gas production had been affected.

Analysts at RBC Capital Markets said that Aramco expected exports to resume in the next few days, “but there is nothing to suggest this is a one-off event and that the Houthi rebels will forgo further attacks on Saudi sites”.

Bill Farren-Price, director of the London-based RS Energy Group said: “The genie is out of the bottle. It is now clear that Saudi and other Gulf oil facilities are vulnerable to this kind of attack, which means that the geopolitical risk premium for oil needs to rise.”