Global oil prices soared as much as 20% to above $US71.00 a barrel for Brent crude as markets reopened after a major attack on Saudi Arabia’s oil infrastructure on Saturday.
That drone attack cut more than half the country’s production with attacks on a 1.5 million barrels a day oil field and a 7 million barrels a day oil stabilisation plant – both of which are located in the oil-rich eastern half of the country.
Brent crude futures jumped more than 20% to a session high of $US71.95 a barrel at the opening of electronic dealings early Monday, while US crude futures surged more than 15% to a session high of $US63.34 a barrel.
Saudi Aramco, the world’s biggest producer, said the attack cut output by 5.7 million barrels a day.
Aramco gave no timeline for output resumption. A source close to the matter told Reuters the return to full oil capacity could take “weeks, not days.”
The dramatic rally followed early indications post attack that Saudi Arabia’s oil production is expected to be well below maximum capacity for weeks.
Traders expect the price to continue rising through Monday as desperate end-users in Asia – especially Japan, China, South Korean and Indian buyers scramble to find new sources of crude.
The drop in Saudi output will remove the global oversupply threat that the IEA warned about last week and could be a game-changer so far as inflationary pressures are in major economies.
In Australia, the surge in prices will spark a similar rise in oil and petrol prices in the next week or so and add to inflationary pressures currently running at 1.6% a year.