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SAUDI OIL ATTACKS: Will Fuel Prices Go Higher ?

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SAUDI OIL ATTACKS: Will Fuel Prices Go Up?
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Last Saturday two of the oils extraction sites in Saudi Arabia have suffered drone attacks that paused the supply of oil, to the other parts of the world. Aramco is the state-owned oil facility and one of the biggest and most profitable businesses in the world which have been attacked with drones. The company generates 10% of the oil that other countries need. The USA has accused Iran of these attacks and Iran has denied each word uttered by eth American authorities.

After the drone attacks of the oil facilities of Aramco, there have been a lot of rumors circulating in the market about the change in the price of oil. According to experts, the consumer might not see a sudden change in the process of oil but in future the prices may increase.

The drone attacks on the largest oil facility in the world that have paused almost 5% of the world oil supply offline has raised many questions about the security of the world top most oil facility. People have been thinking about the vulnerability of these oil processing units. People have been showing deep concerns over the security of the oil facility that is significant part of the infrastructure of global energy. Abaqaiq, in the biggest facility of Aramco, it has the capacity of processing 7% of world’s supply. On the other hand Kurais is the oilfield that produces only 1% of the world oil supply.

According to the analysts who have been handling this news the most common and important questions that come in everybody’s minds is why these attacks could not be prevented by accompanying as influential as Aramco. The analysts also are worried if this can happen again.

Reaction Of The Market On Saudi Oilfield Attacks

On Friday the per barrel cost of the crude oil was $ 60 (£48) and according to the estimates made by some of the analysts it might raise up to $80 (£64) or even more. As the response of the oil traders and the scale of damage done to the oilfields as the damage to the oilfields is still to be estimated. Even the prices are raised no one would be able to guarantee the rate with which it will rise.

The analysts have been waiting for the Asian market to start trading on Monday to get the indications about the current situation of the market after the drone attacks on the oilfields of Saudi Arabia. The start of the market on Monday will show the extent to which the market has digested the size of damage done to the oilfields and what change is made in the price of oil. More than three fourth of the oil that Aramco treats, is supplied to Asia. Similar incidents in the past did not have any long term impact on the prices of oil.

The expert of international policy for energy Professor Nick Butler says that the direct impact of the Saudi oil attacks won’t last long. He said that the market adjusts very well with such losses as it has been losing more than 2 million barrels of oil per day that Iran and Venezuela produce. It happens due to the political reasons as the USA, Iran, and Venezuela are not on one page.

Potential Risk To The Region

According to the analysis done by the experts if the attacks are widespread and increase tension in the region then the price of oil might spike at unbelievable speed and for an indefinitely long-term. As per belief of Professor Butler if these attacks face retaliation, then the spiked up prices might sustain indefinitely and result in an economic recession.

The Global Head of Commodity Strategy representing the Royal Bank of Canada Helima Croft said that these attacks may prove to be game-changers for the ever-increasing isolation that ran has been facing in the region.

Now, when the price of crude oil per barrel might reach $81 that is the highest price in four years. The Production units, pipelines and trading routes which spread through the whole region seems to be in danger as the attackers might have planned to attack the oil supplies in future.

The Impact of Saudi Oil Attacks On Consumers

As the attacks have recently happened and a lot of work is still to be done about the scale of the damage done to the oilfields it is not the right time to tell the financial impact that the spike in oil prices will have on the consumers. It all depends upon the size of the spike in oil prices and the duration it lasts it might take weeks if not months to be seen at the end-users end. At present, most of the investors are closely monitoring statements from Aramco and the political reaction of the state of Saudi Arabia.

If you happen to observe the price of petrol in the UK you will see that almost 40% of the price of a liter of petrol is made up of fuel production, oil, and profit, and 60% is the tax. Majority of analysts say that they do not see any noticeable change in the prices of oil supplied at the pumps.

As for western markets, the oil attacks might not have a major impact on oil prices but the consumers of Asian region still have to keep their fingers crossed and wait for the reaction of the market to these attacks.

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