For the first time since 2019 the oil prices are soaring at $70 on Monday after Houthi attack on major oil facilities of the world’s largest oil exporter, Saudi Arabia. The incident shook energy markets already rattled by a decision by oil producers last week to not lift output.
Benchmark U.S. crude oil added $1.10 to $67.19 per barrel, up 1.7%, falling back from bigger gains earlier in the day. It jumped $2.26 to $66.09 per barrel on Friday.
The devastating winter freeze that hit Texas and other parts of the southern United States last month knocked out production of roughly 4 million barrels per day (bpd) of U.S. oil, pushing prices above $60 a barrel.
Last week, with oil prices rising, some observers were expecting the Organization of the Petroleum Exporting Countries (OPEC) cartel and its allies to lift more restrictions and let the oil flow more freely. But OPEC agreed to leave most restrictions in place, despite growing demand.
The strikes on Saudi sites have increased in frequency and precision in recent weeks, raising concerns about Saudi Arabia’s air defences and the expanding capabilities of the Iran-backed rebels across the border in Yemen.
A Saudi-led coalition launched an air campaign on war-torn Yemen’s capital and on other provinces Sunday in retaliation for missile and drone attacks on Saudi Arabia that were claimed by the Iranian-backed Houthi rebels.
The official Saudi Press Agency quoted an anonymous official in the Ministry of Energy as saying that a drone flew in from the sea and struck an oil storage site in Ras Tanura, the port run by Saudi Arabia’s state oil company, Aramco.
In 2019 key oil facilities in Saudi Arabia were attacked causing prices to hike 14% the very next day.
Stephen Innes of Axi said in a report Monday,
“The last thing anyone wants in a recovering global economy is higher oil prices, and we are likely nearing a point when higher oil prices become a negative rather than a positive influence over risk assets.”
Increasing prices are helpful for oil industry provided the billions of loss it has suffered due to pandemic.