Oil prices spike 19% after drone attack on Saudi Arabian facilities

Brent crude oil futures jumped close to US$12 per barrel within seconds of trading on Monday, which is the biggest increase in dollar value since the product was launched in 1988.

Brent crude was up by 19% to US$71.95 per barrel, a spike from Friday’s US$60.46. United States (US) West Texas Intermediate, meanwhile rose 15% to US$63.34.

State energy producer Saudi Aramco shredded 5.7 million barrels per day of output on Saturday after a drone strike hit the world’s biggest crude-processing facility in Abqaiq, a Saudi Aramco gated community and oil processing facility.

The amount of oil supply removed accounts for around 5% of global oil supply.

The drain on the oil facility makes it a shock disruption to oil markets. The last time oil supplies faced such a shock was in 1990 when former Iraqi president Saddam Hussein invaded Kuwaiti, resulting in a loss in petroleum supply on both sides.

The oil supply disruption caused safe haven assets to surge on fears of a geopolitical fallout due to the attacks, such as gold and Japanese Yen.

US president Donald Trump has given the green light to release oil from US’ emergency oil reserves in a response to the Saudi supply disruption which caused prices to ease slightly.

As of 1.39am GMT, Brent oil eased to gain by 11.13% at US$66.42 per barrel, according to IG data.

In a tweet responding to the attacks, Trump said: ‘There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!’

Meanwhile, the US secretary of state Mike Pompeo accused Tehran, the capital of Iran, of the attacks. Iran however, has accused the US of “deceit”.

Saudi Arabia is expected to tap into their reserves to cope with the exports for this week, BBC reported. The kingdom is the world's biggest oil exporter, shipping more than seven million barrels daily.