Oil continued its surge on Monday, jumping to $70 (£51) a barrel after one of Saudi Arabia’s key oil facilities came under a missile and drone attack from hostile forces in Yemen over the weekend.
The storage tank that was targeted on Sunday at Ras Tanura in the country’s Gulf coast is the world’s largest crude terminal. It is capable of exporting roughly 6.5 million barrels a day, representing nearly 7% of oil demand.
However, output appeared to be unaffected. The Saudi energy ministry confirmed there were no casualties or loss of property from the attacks.
Shrapnel from a missile also landed close to a residential compound for employees of Saudi Aramco (2222.SR), the world's largest oil company, in a town close to Ras Tanura.
Brent crude (BZ=F), the international benchmark, rose as much as 5% to its highest in 14 months before easing slightly. It has risen around 35% in the year to date.
Stephen Innes, chief global markets strategist at Axi, said the possibility of supply disruption pushed prices higher.
He said: “Oil prices have spiked higher this morning after Iran-backed Houthi rebels unleashed a coordinated attack on Saudi Arabia oil facilities and military bases. With OPEC pursuing a tight oil policy and US Shale Oil inelastic supply response to higher prices, any disruption to the Middle East supply chain could shoot oil prices considerably higher.”
It comes in addition to the agreed measures last week by the Organisation of Petroleum Exporting Countries and its allies (OPEC+) to mostly maintain their supply cuts for April.
An increase of 500,000 barrels a day was widely expected, however, Saudi Arabia agreed to maintain a voluntary 1 million barrels per day cut despite calls from some smaller producers to allow a modest loosening.
Russia was allowed a 130,000 barrel a day increase in quota and Kazakhstan 20,000.
The group is awaiting a more solid recovery in demand from the coronavirus pandemic despite a recent rally in oil prices in the past two months.
Saudi’s oil minister Prince Abdulaziz bin Salman, acknowledged that the market had improved since January, but wanted to “urge caution and vigilance,” adding that “…before we take our next step forward, let us be certain that the glimmer we see ahead is not the headlight of an oncoming express train.”
Last week, Goldman Sachs raised its forecast for Brent crude by $5 to $75 per barrel in the second quarter and $80 in the third quarter.
Russ Mould, investment director at AJ Bell said: “The only problem is the rise in oil will only add to the key concern which is dogging markets – namely the risk of runaway inflation and a resulting increase in interest rates."
The next OPEC+ meeting is on 1 April.
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