Oil price drops more than 6% as Saudis rush to fix two major facilities hit by drone strikes
- Drone attacks on Saturday knocked out around five per cent of global oil output
- It sent prices soaring at the fastest rate since the Gulf War nearly 30 years ago
- Yesterday Riyadh reassured markets saying output would soon return to normal
Oil prices fell by more than six per cent yesterday after Saudi Arabia said its output would return to normal within weeks following crippling drone strikes on Saturday.
The attacks on Saturday, which America says were launched from Iran, knocked out production of 5.7million barrels a day – around five per cent of global oil production.
It sparked fears of an oil crisis and a conflict in the tinderbox Gulf region, sending oil prices soaring by up to 20 per cent on Monday.
But senior Saudi officials reassured the markets yesterday, saying the Khurais oil field and Abqaiq processing facility would be operational again within weeks.
They also said that the kingdom is already close to restoring 70 per cent of the production capability lost during the attacks.
Smoke rises following a drone strike on the Aramco facility in Abqaiq, Saudi Arabia. When markets reopened the price of oil rose almost 20 per cent to just under $72 a barrel
‘I have good news for you… the oil output to international markets is back to what it was before the attack,’ Prince Abdulaziz bin Salman told reporters in Jeddah.
‘During the past two days the damage was contained and 50 per cent of the production has been recovered,’ he added. ‘Production will be back to normal by the end of September.’
Prices fell by more than seven per cent before the news conference had even finished yesterday.
The extent of the damage at the plants remains unclear and Energy Intelligence has said that some of the repair work could take ‘several weeks’.
Both sites are owned by Saudi state-backed oil giant Aramco, which produces almost as much oil as Shell, Exxon, Total and Chevron put together.
The Saudi assurances had an immediate impact, as Brent crude dropped to around $65 a barrel.
Monday’s price surge to just under $72 a barrel was the biggest intra-day jump since the first Gulf War nearly 30 years ago.
Analysts warned the market will remain highly volatile amid fears that President Donald Trump could retaliate against Iran, which the U.S. believes was behind the drone strikes.
Fiona Cincotta, at broker City Index, said: ‘Oil is experiencing heightened levels of volatility and we don’t expect this to end soon.
‘Traders will remain fixated on recovery time for the production facility, but also on what Trump will do next.
‘Any indication that Trump could retaliate against Iran could send oil prices higher once again.’
As the U.S. points the finger of blame at Saudi Arabia’s regional rival Iran, Prince Abdulaziz – half-brother to Prince Mohammed – refused to be drawn on who was responsible for the strikes.
‘We don’t know who is behind the attack,’ he said, adding that the kingdom wants ‘proof based on professionalism and internationally recognised standards’.
Washington has concluded that the attacks were launched from Iranian soil and that cruise missiles were involved.
An American official said evidence would be presented at the UN General Assembly next week.
Iran’s foreign minister Mohammad Javad Zarif rebuffed the American claims, saying Washington was ‘in denial’.
The apparent hardening of the U.S. position came as Iran’s supreme leader ruled out negotiations with Washington ‘at any level.’
That appeared to wreck remaining hopes for a dramatic meeting between Trump and Iranian President Hassan Rouhani at the UN next week.
Speaking to reporters on Air Force One over California, Trump said he too had cooled on what had always seemed to be a diplomatic longshot.
‘I never rule anything out, but I prefer not meeting him,’ Trump said.
The drone strikes were the latest in a series of alarming incidents which have sent Middle East tensions spiralling in recent months.
The U.S. similarly blamed Iran for a number of explosions on Gulf oil tankers, but Tehran repeatedly denied any involvement.