Oil prices spike the most in history, after Saudi Arabia attacked

Oil prices soared after a coordinated attack hit the heart of Saudi Arabia’s oil industry on Saturday, forcing the kingdom to cut its oil output in half.

Brent crude futures, the international benchmark, rose as much as 19.5% to $71.95 per barrel at the open, the biggest intraday jump on record. By 9:43 a.m. ET, the contract was at $66.34, up $6.17 or 10.25%.

U.S. West Texas Intermediate futures climbed as much as 15.5% to $63.34. The contract was later at $60.25, up $5.39 or 9.83%.

An oil processing facility at Abqaiq and the nearby Khurais oil field was attacked on Saturday, knocking out 5.7 million barrels of daily crude production or 50% of the kingdom’s oil output. Saudi Aramco, the national oil company, reportedly aims to restore about a third of its crude output, or 2 million barrels by Monday.

“While in the short term the direct physical impact on the market might be limited, this should move the market away from its bearish macroeconomic cycle and raise the risk premium in the market as funds reduce their short positions,” said Chris Midgley, global head of analytics, S&P Global Platts.

Oil prices came off their highs after President Donald Trump said he was authorizing the release of oil from the Strategic Petroleum Reserve to keep the markets “well-supplied.”

Donald J. Trump

@realDonaldTrump

Based on the attack on Saudi Arabia, which may have an impact on oil prices, I have authorized the release of oil from the Strategic Petroleum Reserve, if needed, in a to-be-determined amount….

Donald J. Trump

@realDonaldTrump

….sufficient to keep the markets well-supplied. I have also informed all appropriate agencies to expedite approvals of the oil pipelines currently in the permitting process in Texas and various other States.

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Abqaiq is the world’s largest oil processing facility and crude oil stabilization plant with a processing capacity of more than 7 million barrels per day. Khurais is the second largest oil field in the country with a capacity to pump around 1.5 million barrels per day. In August, Saudi Arabia produced 9.85 million barrels per day.

Yemen’s Houthi rebels claimed responsibility for the attack, saying it was one of their largest attacks ever inside the kingdom. The Houthis have been behind a series of attacks on Saudi pipelines, tankers and other infrastructure in the past few years.

Trump also said there is reason to believe the U.S. knows the culprit and is “locked and loaded,” while waiting to get the verification from the kingdom to proceed.

Donald J. Trump

@realDonaldTrump

Saudi Arabia oil supply was attacked. 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 this attack, and under what terms we would proceed!

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The U.S. has blamed Iran for the drone strikes on those important facilities. Secretary of State Mike Pompeo said in a tweet Saturday Iran has launched an “unprecedented attack on the world’s energy supply.”

“If the Iranians have been driven to desperate measures from the loss of crude export revenues, an attack on Saudi capacity seems a likely response,” Jason Gammel, energy analyst at Jefferies, said in a note on Sunday. “The risk of wider conflict in the regions, including a Saudi or US response, will likely raise the political risk premium on crude prices by $5-10/bbl.”

Goldman Sachs said an extended oil outage could…

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