Saudi oil attacks push prices up by highest amount since 1988


The Saudi oil attacks have triggered the steepest petroleum market price surge in 30 years and stoked fears for the global economy.

The attacks on Saudi Arabia’s oil infrastructure led to the biggest jump in global prices since 1988 by wiping out 5.7m barrels of production a day – 5% of the world’s oil supply.

The price of Brent crude surged by more than $12 (£9.60) a barrel within seconds as trading began in London, quickly breaching the $70 a barrel mark.

The energy price shock reverberated through global markets, driving up shares in energy companies on the prospect of higher profits, while stock exchanges across Europe plunged into the red as investors took fright over rising geopolitical tensions.

Oil market analysts claim prices could surge towards $100 a barrel in the coming weeks if Middle East tensions reignite disruption in the strait of Hormuz, a key transit route for the world’s oil tankers.

A Middle East energy crisis could be a boon for US shale producers, but threatens to tip the stumbling global economy into a major recession by stemming supply to Asian economies.

Donald Trump said the US was “locked and loaded” to retaliate and could authorise the release of US oil reserves to help balance the market. But energy experts cast doubt on whether US fracking companies would be able to fill the gap left by Saudi oil production plants.

Bjørnar Tonhaugen, the head of oil markets at Rystad Energy, said the world was “not even close” to being able to replace Saudi exports.

READ  Metro Bank's attempts to carry on as normal are getting ridiculous

“The market’s reaction to Saudi Arabia’s importance, in the new era of US shale, will now be put to the test,” he said.

The global economy has been faltering against a backdrop of rising trade tensions between the US and China. Demand for oil had been falling in recent months as industrial production slowed while the world’s two biggest economies imposed punitive tariffs on one another’s goods.

Economists said higher oil prices could compound the pressure on manufacturing output, which had already plunged into recession territory as a result of the trade war, serving as a further brake on global growth.

Philip Shaw, the chief economist at the City bank Investec, said: “Against a background where you have global trade on a downward trajectory because of the tariff war between the US and China, it’s not helping at all.”

The spike after the Saudi attacks returned the oil price to levels last seen in July, which analysts said could mitigate some of the impact on global growth. However, Shaw said growth around the world could slip below 3% this year, marking the weakest expansion since the depths of the global financial crisis in 2009.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

Higher fuel prices may also drive up inflation and have an impact on consumer spending power. However, weaker levels of economic growth could drag down the price of oil as demand falters.

Some energy experts believe the global oil price shock may even help efforts to shift economies from fossil fuels to green energy alternatives.

Artur Baluszynski, the head of research at Henderson Rowe, said Europe may “feel the pain of higher energy prices” in the short term, “but in the long term, more expensive fossil fuels will accelerate Europe’s already leading position in renewables like wind and solar”.

READ  Fracking paused in Blackpool after biggest tremor to date

Callum Macpherson, the head of commodities at Investec, said: “Only time will tell, but we may look back on this incident as a critical development in motivating the energy transition.”





READ SOURCE

LEAVE A REPLY

Please enter your comment!
Please enter your name here