- Strikes that knocked out half of Saudi Arabia’s oil production could lead to higher oil prices globally, according to analysts.
- The production shutdown amounts to about 5% of the world’s daily production of crude oil, or roughly 5 million barrels.
- The Saudi stock index fell 2.3% at the opening Sunday before recovering, Reuters reported.
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On Saturday, strikes on two major Saudi oil refineries knocked out about half of Saudi Arabia’s oil production.
The production shutdown amounts to about 5% of the world’s daily production of crude oil, or roughly 5 million barrels. The attacks came as the state-owned oil giant Saudi Aramco has been plotting a massive initial public offering. Yemen’s Houthi rebel group claimed responsibility for the attacks, though the US cast suspicion toward Iran.
Reuters reported that other Gulf stock markets were down, including in Kuwait and the United Arab Emirates.
Beyond the Gulf states, the attack could have a big impact on energy prices globally, with some analysts estimating that the price of crude oil could jump $US10 when trading opened Sunday evening.
“This is a big deal,” Andrew Lipow, the president of the consultancy Lipow Oil Associates, told CNBC on Saturday. “Fearing the worst, I expect that the market will open up $US5 to $US10 per barrel on Sunday evening. This is 12 to 25 cents per gallon for gasoline.”
But higher prices may not have the same effect on the US economy as they have had in the past, The Wall Street Journal reported Sunday, in part because of the rise in US oil production. In the 1970s, sky-high oil prices caused by an embargo imposed by Arab oil producers led to a stock-market crash.
Ryan Kellogg, an economist at the University of Chicago, told The Journal, however, that higher prices could affect the US if they lingered.
“To the extent those slowdowns are going to ripple through the trade system, we could see some of those impacts in the US as well,” Kellogg told The Journal.