Saudi oil attack set to hike global energy bills
An attack on Saudi Arabia that triggered the biggest jump in oil prices in almost 30 years is set to drive a hike in energy costs and roiled markets yesterday.
The drone attack was carried out with Iranian weapons, a Saudi-led coalition said on Monday, as US President Donald Trump said Washington was “locked and loaded” to hit back.
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Saturday’s attack on Saudi oil facilities halved the kingdom’s production and jolted world oil markets.
Oil prices surged nearly 20pc at one point on Monday, with Brent crude posting its biggest intraday gain since the 1990-1991 Gulf crisis, before paring gains to trade up about 10pc on the day.
The attack is linked to a civil war in Yemen, where Saudi Arabia is heavily involved.
The Iran-aligned Houthi group that controls Yemen’s capital claimed responsibility for the attack, which damaged the world’s biggest crude-processing plant and knocked out more than half of Saudi Arabia’s oil production.
Iran denied US accusations it was to blame and said it was ready for “full-fledged war”.
Two sources briefed on state oil company Saudi Aramco’s operations told Reuters it might take months for Saudi oil production to return to normal. Earlier estimates had suggested it could take weeks.
The price hike is set to be passed on to motorists and industry here within weeks. Irish motorists were warned that petrol prices at the pumps and home-heating oil costs could rise by between 8pc and 10pc.
The Irish Petrol Retailers’ Association (IPRA) said the spike in Brent crude prices would be passed on at forecourts.
Diesel and petrol prices for drivers could rise by between 6c and 8c per litre, if the high crude prices are sustained, AA Ireland warned.
The scale of the Saudi Arabian attack – carried out by remote controlled drones – has prompted the United States to consider increasing intelligence sharing with Saudi Arabia.
US officials, who spoke on condition of anonymity, did not say how broad any increase in intelligence sharing might go or other options being weighed.
But the United States, long wary of deep involvement in the war in Yemen, has only selectively shared intelligence with Saudi Arabia about the threats from Yemen.
In response to the supply shock, US President Donald Trump approved the use of US emergency oil reserves to ensure stable supply, helping steady oil prices.
The scale of the attack however, and the failure to prevent it, means the risk of further disruption is now being added to market prices.
“This justifies a risk premium on the oil price, so prices are initially unlikely to return to the levels at which they were trading before the attacks,” said Carsten Fritsch, oil analyst at Commerzbank in Frankfurt, Germany.
US crude oil rose 11.43pc to $61.12 per barrel and Brent was last at $67.26, up 11.69pc on the day.
Saudi Arabia officials are discussing delaying a stock market listing of the giant Aramco’s oil producer, the Wall Street Journal reported on Monday, citing people familiar with the matter.
The upheaval in the oil market coupled with and poor economic data from China served to sour investors’ appetite for risky assets.
The MSCI world equity index, which tracks shares in 47 countries, snapped a five-day streak to trade down 0.29pc.
Wall Street slipped as the jump in the price of oil presented yet another headwind for a global economy that is already buffeted by deteriorating manufacturing activity and elevated trade tensions, analysts said.
“There are enough global growth worries without it, but I think the oil spike, higher prices globally could slow world spending on items other than oil, and I think that’s the main concern,” said Rick Meckler, partner at Cherry Lane Investments, New Jersey.
Monday’s rapid spike in crude prices came at a time when central banks in the United States, Europe and Asia are easing monetary policy to fight a slowdown in the global economy amid a drawn-out trade war between Washington and Beijing.
A sustained rise in oil price will hit transport, materials and production costs, with China and Japan particularly reliant on supplies from Saudi Arabia and the Gulf region.
Additional reporting Reuters