Oil price soars by 15% as markets react to attack on Saudi facilities

The price of crude oil jumped by 15% yesterday after an attack on Saudi Arabia’s vast processing facilities cut output by 5.7 million barrels per day, fuelling fears of a global economic crash.

Within seconds of the market opening in London, Brent crude had elevated by more than US$12 before quickly reaching highs of $70.88 – a rise of over 19%. By market close oil had settled at nearly 69% – it’s biggest daily rise since 1988.

In the aftermath of the weekend drone attack on the Abqaiq and Khurais facilities, state-owned oil giant Saudi Aramco was unable to give a specific timeline for the resumption of full output from the vital infrastructure hubs.

Geoffrey Smith, a director at the market data firm Refinitiv, said Saudi Arabia has resumed loading oil from its storage reserves to make up for the immediate production shortfall, although its exports are in doubt longer-term.

“The question is how long Saudi Arabia can maintain export levels and quality while the damage is fixed. The most likely effects are to be felt from November onwards as storage might start hitting critical levels if the processing facility has not been repaired,” he said.

Some analysts have claimed oil prices could reach $100 per barrel in the coming weeks if rising Middle Eastern tensions lead to further disruption in the Strait of Hormuz – an increase that would spell disaster for the global economy.

The ongoing US-China trade war has put the brakes on global economic growth in recent months, and higher oil prices could add further pressure on manufacturing output, which has already moved into recession territory.