Two attacks on Saudi Arabian oil facilities have caused prices to rise by almost 20%. The attacks which took place on Saturday have damaged over 5% of the total worldwide supply.
The two drone strikes were carried out on the world’s biggest petroleum-processing plant, as well as a nearby oil field. Energy giant Aramco owns both facilities, which make up 50% of Saudi Arabia’s oil output. It could be weeks before production is restored to normal levels.
The price of Brent crude oil spiked, jumping up to $71.95 per barrel. US President Donald Trump released US oil reserves to stabilise prices.
Prices currently stand at $65.76 per barrel and $59.54 per barrel for Brent crude and West Texas Intermediate - a rise of 9% and 8.5% respectively. However, both of these prices are lower than the rates seen last October, when Brent crude stood at $86.29 and West Texas International at $76.
US Secretary of State Mike Pompeo has blamed the strikes on Iran. President Trump tweeted that the US knew who the culprit is and is waiting to hear from Saudi Arabia as to how they should proceed.
Iran has accused the US of "deceit”. The Saudis have said that there were no casualties, but have given little other information about the nature of the attacks or how they may affect oil production.
There is uncertainty regarding the availability of oil supplies in the region. Aneeka Gupta, commodities strategist at fund manager Wisdom Tree, said if supply levels aren’t restored within the next six weeks then oil prices could rise above $75 a barrel.
However, she explained that the jump in oil prices wouldn’t affect consumers immediately as they "could take a bit of time of feed through".
International energy policy expert Prof Nick Butler also believes that drivers will not see an immediate increase in fuel prices. He believes that "the direct impact of the attacks could be short-lived.”
"The market has adjusted without blinking over the last two years to the loss for political reasons of over two millions barrels a day of production from Venezuela and Iran."
Simon Williams, from the RAC, said: "There are currently savings in the wholesale price that have only just started to be passed on to drivers by retailers. Many retailers cut their prices by 3p on Friday and we believe that average prices were six pence too high before that, so the impact of these fires may not be too great."
However, Jeffery Halley, senior market analyst at Oanda, believes that fuel prices are likely to increase globally: "You'll see price hikes in gasoline all over world. Consumers will first notice it quite quickly in higher petrol prices."
Mr Halley also warned that airline fuel surcharges could also rise, depending on how airlines have prepared for an increase in the global price of oil.
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