This weekend saw perhaps the single most dramatic shift in the global oil markets. Prices for the energy commodity jumped by 10% in a single day, at one-point rising by 20%, following news that a highly successful drone attack against Saudi Arabia’s chief oilfield would cut output in half.
While the nation’s royalty promised that the country’s production will return to normal by Monday, it appears that a full return to maximum production won’t happen until October, if not much later.
The return of at least some of Saudi Arabia’s oil output has helped send oil prices falling now that things are returning back to normal. The Saudi’s have stated that they will be tapping into their own oil reserves to stabilize daily output to the global markets.
State-run oil giant Aramco mentioned that it has succeeded at restoring 41% of its capacity at the Abqaiq facility that was attacked, an announcement that sent prices of oil back down closer to pre-attack levels. West Texas Intermediate crude fell to $58.30 per barrel while international benchmark Brent crude is now trading at $62.88 per barrel, where just a couple of days ago it was well into the $70s.
Overall, military and intelligence experts were quick to blame Iran for the incident, adding to the already growing tensions between the nations in the area. Earlier oil tanker attacks that were also attributed to Iran sent prices for oil skyrocketing, and this move seems to follow that pattern.
While the original drone attacks had originated from Yemen, the success and sophistication of this particular attack broke the pattern of earlier drone assaults which were largely unsuccessful. The Houthi rebels, who are backed by Iran, claimed responsibility for the attacks and added that they will continue to do so in the future.
While prices for oil have stabilized somewhat, they could easily jump again if tensions escalated further. Just hours ago, news broke that airstrikes were conducted against Iranian-backed militia groups near the Iran-Syria border, with 5 soldiers having been killed in the assault. While this is just a minor incident at this point, the markets are holding their breath to see what the U.S. will do and how they will respond.
President Trump tweeted back on Monday that “There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of the attack, and under what terms we would proceed!” Until then, Trump has said that he plans to substantially increase the already tight sanctions around Iran, although no further details were provided about what this would entail.
Other news in the oil markets include data released regarding America’s domestic supplies. Stockpiles of crude have grown by 1.1 million barrels in the previous week according to the Energy Information Administration.
Gas stockpiles have grown by 800,000 barrels but U.S. production has remained the same at 12.4 million barrels per day. Imports into the U.S. have averaged at 7.1 million barrels, an increase by 326,000 barrels from last week.