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Oil soars after attack on Saudi plants shuts in 5% of global supplY

Oil prices soared on Monday, with posting its biggest intra-day percentage gain since the Gulf War in 1991, after an attack on Saudi Arabian oil facilities on Saturday shut about 5% of global supply.

Brent crude futures, the international benchmark, rose by as much as 19.5% to $71.95 per barrel, the biggest intra-day jump since Jan. 14, 1991. The front-month contract was at $66.28 per barrel, up $6.06, or 10.1%, from its previous close, by 0449 GMT.U.S. 

Saudi Arabia is the world’s biggest oil exporter and the attack on state-owned producer Saudi Aramco’s crude processing facilities at Abqaiq and Khurais has cut output by 5.7 million barrels per day. The company has not given a timeline for the resumption of full output.A source close to the matter told Reuters the return to full oil capacity could take “weeks, not days.“

“We think the attacks would be a wake up call for investors, who have failed to price in risk within the price of crude. Although global supply will contract in the near term, the United States has the ability to supply this contraction,” said Hue Frame, managing director at Frame Funds in Sydney.

“A geopolitical risk premium will return to the oil price,” said Alan Gelder, vice president for refining, chemicals and oil markets at Wood Mackenzie.”This attack has material implications for the oil market, as a loss of 5 million barrels per day of supplies from Saudi Arabia cannot be met for long by existing inventories and the limited spare capacity of the other OPEC+ group members,” he said..