Global Oil prices surged by 1.01% in NSE following a drone strike on an oil facility in Saudi Arabia. The incident resulted in reducing global supplies by 5 percent. The aftermath of the attack saw Brent Futures price spike by almost $12 for a barrel and this was considered as one of the most dramatic oil market opens. Saudi Aramco who is a state energy producer lost almost 5.7 million barrels in daily output on Saturday after 10 aerial drones struck the facility in Abqaiq. The facility was one of the biggest crude oil processing units and it was also the Kingdom’s second-biggest field in Khurais.
For oil markets, this incident was considered as the single worst disruption and it surpassed all the past disruptive events. Considering geopolitical fallout,safe haven assets including the yen, gold, and Treasuries surged. Currencies of many commodity-linked nations like the Canadian dollar and Norwegian Krone advanced and the US gasoline featured increased as much as 13 percent. Saudi has the capability to kick start the production in a few days but it might take a few weeks to restore full capacity. The stockpiles of oil might keep the markets stable for the short term, but Aramco might not be able to fulfill international shipment contracts.
If Aramco takes weeks to recover then it might rattle the oil markets. Furthermore this incident could affect the company’s plan to carry out the world’s biggest initial public offering. In response to the disruption, U.S. President Trump ordered the release of emergency oil reserves.