NEW YORK (Reuters) – Oil prices dropped about 6% on Tuesday after Saudi Arabia’s energy minister said the kingdom has fully restored its oil production hit by an attack this weekend that shut 5% of global oil output.
Oil pump jacks work at sunset near Midland, Texas, U.S., August 21, 2019. REUTERS/Jessica Lutz
Saturday’s attacks raised the specter of a major supply shock in a market that in recent months has been preoccupied with demand concerns and faltering global growth. Oil surged as much as 20% at one point on Monday.
During a news conference on Tuesday, Saudi Energy Minister Prince Abdulaziz bin Salman also said it will keep its full oil supply to its customers this month. He added that oil production in October would be 9.89 million barrels per day.
Brent crude LCOc1 futures sank $4.47, or 6.5%, to settle at $64.55 a barrel. U.S. West Texas Intermediate (WTI) crude CLc1 futures fell $3.56, or 5.7%, to settle at $59.34 a barrel.
Brent sank more than 7% during the news conference.
“The latest news means that we will not be rushing to revise up our oil price forecast of $60 per barrel at end-2019. That said, there remain some important questions to be answered about the attacks, which may mean that we will have to consider a permanently higher risk premium in our price forecasts,” said Caroline Bain, chief commodities economist for Capital Economics, in a note.
In the immediate fallout from the attacks, state-owned producer Saudi Aramco told some Asian refiners it would meet its oil commitments, albeit with changes, sources said.
The attacks on crude-processing facilities at Abqaiq and Khurais resulted in the largest single supply disruption in half a century, and threw into question Saudi Arabia’s status as supplier of last resort.
GRAPHIC: Global oil prices pull back but remain jittery – here
The prospect of releases from strategic oil reserves in the United States, and other industrialized countries that the International Energy Agency advises, such as Japan, have weighed on prices, but the geopolitical threat of retaliation is causing concerns.
U.S. Vice President Mike Pence said the United States was reviewing evidence that suggests Iran was behind the attacks on Saudi oil facilities and stands ready to defend its interests and allies in the Middle East.
“We’re evaluating all the evidence. We’re consulting with our allies. And the president will determine the best course of action in the days ahead,” Pence said.
The United States believes the attacks that crippled Saudi Arabian oil facilities last weekend originated in southwestern Iran, a U.S. official told Reuters.
Relations between the United States and Iran have deteriorated since U.S. President Donald Trump pulled out of the Iran nuclear accord last year and reimposed sanctions on its oil exports.
Tehran rejects the charges it was behind the strikes and on Tuesday ruled out talks with Trump. Saudi King Salman meanwhile called on governments around the world to confront the threats to oil supplies.
Meanwhile, the markets also looked ahead to weekly data on U.S. oil inventories, with crude stocks forecast to have dropped for a fifth straight week.
Industry data on oil inventories for last week will be at 4:30 p.m. EDT (2030 GMT), followed by the government’s report at 10:30 a.m. EDT on Wednesday.
Additional reporting by Sabina Zawadzki in London and Aaron Sheldrick in Tokyo; Editing by Marguerita Choy and Louise Heavens