Oil prices could test the US$80 a barrel Brent Crude price, following the attacks on the Abqaiq facility and the Khurais oil field in Saudi Arabia this weekend, S&P Global Platts Analytics said in a note.
The attacks on the Saudi oil facilities sparked a massive fire at a crude processing plant essential to global oil supplies. The closure impacts 5 million barrels of crude processing per day, affecting 5 percent of the world's daily oil production.
Terrorist attacks with projectiles resulted in a production suspension of 5.7 million barrels of crude oil per day, Saudi Aramco said on Saturday, confirming the loss of more than half of the Kingdom's oil production.
"Work is underway to restore production and a progress update will be provided in around 48 hours," the state-held giant-the world's largest oil company-said in a statement on Saturday, hours after the attacks.
The now high risk premium and the sudden elimination of spare capacity adds a potential US$5-10 premium to oil prices, S&P Global Platts Analytics said, noting that "prices are likely to break out of the $55-65/b options range, more likely testing the high $70/b previously forecast, if not higher."
On Monday, at the start of the first trading day since Saturday's attacks, Brent Crude prices soared 20 percent at opening, surging the most on record.
Additional risk premium "could see prices test $80/b despite Saudi Arabia today claiming production and exports will not be significantly impacted," S&P Global Platts Analytics said on Saturday. Related: U.S. And Russia Battle It Out Over This Huge Iraqi Gas Field
The attacks have also wiped out the global spare capacity, which Platts Analytics estimates to be 2.3 million barrels per day, with over 1.6 million bpd of this located in Saudi Arabia.
The International Energy Agency (IEA) said in a brief statement on Saturday that "The IEA is monitoring the situation in Saudi Arabia closely. We are in contact with the Saudi authorities as well as major producer and consumer nations. For now, markets are well supplied with ample commercial stocks."
The expected update from Saudi Arabia and a potential timeline of restoration of production will determine the next move for oil prices.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
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