Oil prices jumped 15% during the first day of trading this week, making levels not seen in months. This came after an attack on one of Saudi Arabia’s main oil facilities. The attack is believed to have halted about 5% of the entire world’s oil supply.
Prices have since stabled at the moment, with Brent crude trading back at $64.81 on Tuesday trading, having reached highs of $71.95 a barrel on Monday. WTI currently trades $59.22. The market is likely to go into a wait and watch sentiment even as more news about the attack and the supply situation continues to cause jitters in the oil market.
The prices have also relaxed a bit after announcements that Saudi Arabia may restore normal supply between 2 to 3 weeks. Some more information that may cause some more fluctuation is the news that there may be discussions to delay Saudi Aramco’s (Saudi Arabian Oil Company) IPO.
The US considering digging into its strategic reserves
In the US quarters, most energy companies chose not to increase their supplies to fill the void. Most instead chose to reap profits from the shortfall. The OPEC and Russia also held a somewhat similar stance, choosing not to pump more oil to bridge the gap. The US President has however reassured Americans of stable pump prices by authorizing the strategic petroleum reserves to release some oil – if the need arises.
High pump prices could slow down consumer spending
The situation in the Gulf region is of great interest to the major world economies as a disruption in oil supply is likely to lead to high consumer prices and economic slowdown in countries that heavily depend on oil supply. The race is on for various states to do all they can to stabilize the oil prices so that the consumers do not hurt. If consumer spending took a hit, the individual economies would not have much leeway to correct their economic growth projections.