New Delhi: Global crude oil prices which surged almost 20% on Monday slid 6% on Tuesday morning on the signals of Saudi Arabia’s output to resume to normal level quickly, contrary to previous speculation. Brent crude slid down 6.19% to $63.49 per barrel while WTI sank 6.09% to $59.07 per barrel. However, despite the slide oil prices still trading up week over week.
According to a top Saudi official Saudi Arabia is likely to bring back 70% of the 5-7 million barrels of per day production and for the rest to resume will take 2-3 weeks. It also allayed any fear of shortfall in supply disruption.
Global crude oil prices skyrocketed 20% on Monday, in the the wake of Houthi’s drone attacks on Saudi Arabia’s 2 vital oil infrastructure, Aramco facility in the city of Abqaiq- world’s largest oil processing plant- and Khurais oil field which is situated 150 km away from Riyad. The attacks knocked off 5-7 barrels of per day production, and immediately cut off 50 % oil production of Saudi Arabia and 5 % of total world oil production. Fears over disruptions in oil supply instilled uncertainty and caused oil stocks to surge sharply. The surge was biggest since 1988.
But the fear of shortage or disruption in supply is a little ironical if we consider the recent glut- caused by the record shale production of US and Canad- in the oil market which led to the massive slump in the prices. It led to the volatility in the oil prices prompting OPEC and allied countries to ink deal ( OPEC+ deal) to cut off production so prices becomes stable. Saudi Arabia is the leader of OPEC. So if there was a disruption other members could always offset the shortage. US too indicated that they had plenty of oil reserve for making up for the shortfall. This was not first time when Yemen’s Houthi rebels targeted Saudi Arabia’s oil infrastructure. Previously in May, they had targeted Aramco pumping stations in the Eastern Province. Though Saudi Arabia accused Iran of arming and directing the Houthis to launch attacks on the kingdom’s border, Iran has denied it completely.
Saudi Arabia is involved in attacking and bombing Houthi rebels in Yemen since it intervened in the country’s civil war in 2015 to support ousted President Abdrabbuh Mansur Hadi’s fight against Houthi rebels, who control the nation’s capital Sanaa. For perpetrating human rights violations it has been under UN and other human rights organizations. In its investigation on attacks on its oil facilities, Saudi Arabia has pinned blame on Iran echoing US accusation. This may further escalate geopolitical tensions in Middle East, which was already brewing and bring more uncertainty in oil market.