The aerial drone attacks on Saudi Arabian oil installations last Saturday began to dent the world economy on Monday with oil prices soaring to their highest percentage increases on record.
The attacks on Saudi Arabia's oil industry, which is now being blamed on Iran, temporarily impeded 5 percent of global daily production and forced Saudi Arabia the kingdom to cut its oil output in half.
Iranian President Hassan Rouhani on Monday said the attacks on Saudi Arabia were a "reciprocal response" to Saudi aggression against Yemen but without admitting Iranian participation.
The effect was that oil prices skyrocketed Monday with Brent crude futures (the international benchmark) soaring as much as 19.5 percent to $71.95 per barrel at the open. This was the biggest jump on record, said, industry experts. The contract closed lower at the end of the trading day but was still up 14.6 percent at $69.02.
U.S. West Texas Intermediate futures climbed as much as 15.5 percent to $63.34, the biggest jump since December 2008. The contract settled down at $62.9, up to $8.05 or 14.8 percent.
U.S. gasoline futures surged 12.8 percent, or $0.20, at $1.75 per gallon.
Oil prices cooled down after President Donald Trump said he was authorizing the release of oil from the U.S. Strategic Petroleum Reserve to keep the markets "well-supplied."
Abqaiq is the world's largest oil processing facility and crude oil stabilization plant with a processing capacity of more than 7 million barrels per day (bpd). Khurais is Saudi Arabia's second-largest oil field with a capacity of 1.5 million bpd. Saudi Arabia produced 9.85 million bpd in August.
"If the Iranians have been driven to desperate measures from the loss of crude export revenues, an attack on Saudi capacity seems a likely response," said Jason Gammel, an energy analyst at Jefferies. "The risk of a wider conflict in the regions, including a Saudi or US response, will likely raise the political risk premium on crude prices by $5-10/bbl."
Goldman Sachs said an extended oil supply cut might push Brent crude prices upwards of $75 per barrel because the attack disrupted one of the world's largest energy supply chains. Both installations attacked by the drones, Abqaiq and Khurais, are owned and operated by Saudi Aramco or the Saudi Arabian Oil Company.
