Premiums on Brent crude prices are expected to continue amid fresh reports of sabotage, the latest being that Saudi Aramco had closed two of its pumping stations following a fire caused by armed drones.
The latest developments follow attacks on four ships in off the coast of the UAE.
Over the span of three days, two sabotage incidents have been reported — one happening off the coast of Fujairah, which is close to the Strait of Hormuz. One third of the world’s maritime crude passes through the Strait of Hormuz every day.
Brent crude prices gained even as Aramco said its oil and gas supplies were not “impacted as a result of this incident.”
“The weekend incidents of attacks on Saudi and UAE ships near Fujairah were priced into crude in Monday’s trading, but only briefly. Today’s report of drone attacks on Saudi oil pumping stations are bringing back the fear premium, which may sustain,” Vandana Hari, founder and chief executive officer of Singapore-based Vanda Insights, said.
The front month Brent crude contract jumped as much 1.7 per cent to an intra-day high of $71.44 per barrel, before ending the day 0.97 per cent higher than the previous session at $70.91. West Texas Intermediate (WTI) also jumped 1.02 per cent to $61.66 per barrel.
UBS commodity analyst Giovanni Staunovo expects a $5 (Dh18.36) extension of the price range from current levels, meaning there would a further premium.
“We expect Brent to move up to $75 over the next few weeks, and expect [it] to trade between $70-80 over the next six months,” Staunovo told Gulf News.
“Given that nearly one third of global oil production is produced in the Middle East and nearly all of global spare capacity sits in the region, the oil market is very sensitive to any attacks on oil infrastructure in this region … even more if it impacts the country with the largest spare capacity and the de facto Opec leader.”
Saudi Arabia, which is the third-biggest producer of oil after the United States and Russia, produces 11 million barrels of oil per day, while the UAE produces 3 million barrels of oil per day. Both the countries contribute to 17 per cent of global production.