Oil prices attained new heights after an attack was successfully performed on Saudi Arabian oil production. While this development shocked markets, it is speculated to disrupt the global supply of crude temporarily. As a result of this predicament, U.S. oil futures peaked 14.7 percent, surging the value up to $62.90 per barrel, its biggest since January 2009. On the other hand, gasoline futures shot up to 13 percent, directly affecting the general public.
Oil prices retreated after U.S. President Trump announced that he had authorized the use of oil from the country’s emergency oil supply i.e. the Strategic Petroleum Reserve, the largest backup pool of oil.
Tom Kloza, chief oil analyst for the Oil Price Information Service, which monitors the price of oil across the United States, said gasoline prices will likely grow this fall, rather than following the historical path of dropping steadily. Previously, Saudi Arabia had cut back its crude and other energy products’ production as the largest oil exporter produces approximately 10% of the total global supply of 100 million barrels per day.
The U.S. led coordinated drone strikes on key Saudi Arabian oil facilities disrupted nearly 5% of the daily global oil supply. The location is the world’s largest oil processing plant. Prince Abdulaziz bin Salman, Saudi Energy’s (SE) Minister also mentioned that it has affected crude oil and gas production close to 5.7 million barrels a day.
Speculators believe that the long-term impact of the shock to the thriving oil market will most likely depend on how long it takes Saudi Aramco to get fully back online. As per the sources, a small $2-$3 per barrel premium would emerge if the damage appears to be an issue that can be resolved quickly, and $10 if the damage to Aramco’s facilities is significant. The eventual stock prices is also dependent Saudi Arabia’s capability to resume its oiling operations.
Moreover, JPMorgan Asset Management’s Kerry Craig also highlighted that the oil producers’ ability to dip into stockpiles may be able to reduce the price jumps. Craig had also officially mentioned that premium markets will focus to further reflect the risk of unforeseen attacks.
In this light, it is important to note that one of the biggest factors playing into our current economic outlook is uncertainty in addition to the higher oil prices. As a result, higher gas prices are expected to directly affect American consumers, whose spending power has historically stabilized a U.S.