LONDON (Reuters) – Brent crude jumped above $ 71 a barrel after Saudi Arabia said the world’s largest crude oil terminal was attacked, although production appeared not to be affected after the missiles and drones were intercepted.
London futures jumped 2.9% to the highest level since January 2020 before easing slightly. The kingdom said a storage tank in Ras Tanura, on the Gulf coast, was targeted on Sunday by a drone coming from the sea.
The plant is capable of exporting approximately 6.5 million barrels per day – roughly 7% of oil demand – and as such, it is one of the most protected facilities in the world.
The attack comes after an escalation of hostilities in the Middle East region recently after Houthi rebels in Yemen launched a series of attacks on Saudi Arabia. The new US administration also carried out air strikes in Syria last month on sites it said were linked to Iranian-backed groups.
Oil’s rally accelerated last week after Saudi Arabia and OPEC + made a surprise pledge to keep production stable in April. The move prompted a large group of investment banks to raise their price forecasts, as Goldman Sachs Group Inc estimates that the global benchmark Brent crude will exceed $ 80 a barrel in the third quarter.
The broader market is also supported by bullish Chinese export data and expectations of US stimulus.
President Joe Biden is about to score his first legislative victory as the House prepares to pass his $ 1.9 trillion COVID-19 relief plan, the second largest economic stimulus in American history.
“It’s the perfect mix of upbeat news at the moment,” said Warren Patterson, head of commodity strategy at ING Bank NV in Singapore. “It appears that these attacks are increasing more frequently, so the market may need to price some risk premium.”
Brent Crude Oil Rapid Time spreads at $ 0.71 a barrel in the opposite direction, which is a bullish market structure as the first month contract trades higher than subsequent shipments. It averaged $ 0.58, down last week.
Sunday’s attack is the most dangerous on Saudi oil facilities since a major processing facility and two oilfields came under fire in September 2019, cutting oil production for several days and exposing the weakness of the Saudi oil industry.
The Houthi rebels claimed responsibility for this attack, although Riyadh has accused Iran of the finger.