Oil spiked a record 20% on the sudden attack to Saudi Arabian oil supplies
- Crude oil surged more than 20% on Monday after markets reopened following the targeted drone strikes on Saudi Arabian oil facilities.
- "This is a big escalation in terms of the scale and reach of these attacks so raises prospect of ongoing disruption and raises the geopolitical danger."
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Oil prices surged as much as 20% in opening trading on Monday after a shock attack on Saudi Arabian oil facilities, which Bloomberg said affected almost 6 million barrels, or about 5% of the global market.
After the initial spike, Brent crude was up 8.4% to about $65 a barrel at 8:30 in London (3:30 EST) and WTI up 7.6%.
"London's Brent futures leapt almost $12 in the seconds after the open, the most in dollar terms since they were launched in 1988," Bloomberg wrote. Prices stabilized, "but were still heading for the biggest advance in almost three years."
Neil Wilson, chief markets analyst at Markets.com, said: "This is a big escalation in terms of the scale and reach of these attacks so raises prospect of ongoing disruption and raises the geopolitical danger."
"It's going to add a massive risk premium to crude prices, so it will likely materially drive prices higher for a while. The big uncertainties right now for crude are 1) the extent of the outage, 2) how does this escalate, and 3) could there be more attacks of this kind. What is certain is the genie is out of the bottle in terms of risk premium," Wilson added.
US officials said that the attack on Saudi's oil fields appears to have come for Iran, Reuters reported. This cast doubt on the original claims that the claims made by the Yemeni Houthi group that drones were used to hit the Kingdom's supplies.
The attacks also cast doubt on Saudi playing a strong and reliable role in the global oil market, something that Wilson says the Kingdom has done for the last 50 years.
"Saudi Arabia is supposed to be the reliable lynchpin, able to ramp production at will. It indicates ongoing destabilization to global energy markets and will raise very real concerns about the Aramco IPO," Wilson said.
Saudi Aramco, the state-backed energy company, is scheduled to go public later this year - estimate by Saudi officials, put the company worth around $2 trillion. meaning it could raise $100 billion from its IPO.
Get the latest Oil WTI price here.