Saudi Arabia: Supply shortage fears following Saudi attacks push up oil prices in September
Drone strikes on Saudi Arabian oil facilities on 14 September disrupted global oil supplies and sparked concerns about a military escalation in the Middle East. Against this backdrop, oil prices surged in the aftermath of the attack before receding slightly in the following days. On 26 September, the OPEC oil basket traded at USD 62.4 per barrel, a 5.4% increase from the same day in August. While the price was up 21.0% from the start of the year, it was still 23.6% lower than on the same day in 2018.
News that Iran-backed Yemeni Houthi rebels launched a drone attack on a major oil processing facility and a nearby oil field in Saudi Arabia, effectively shutting down more than half of Saudi Arabia’s oil crude production, led oil prices to post one of the biggest daily jumps in history. Saudi Arabia’s claim that it would restore full capacity by the end of September and U.S. President Donald Trump’s authorizing the use of the country’s Strategic Petroleum Reserve (SPR) alleviated concerns of a sharp downturn in global supply. Saudi oil production capacity was fully recovered on 25 September. Looking ahead, although imminent military retaliation is not on the cards for now, the incident has worsened the already strained relationship between Iran and Saudi Arabia and its ally the United States. Moreover, oil prices were affected by news related to the trade war between China and the United States.
Meanwhile, combined crude oil output among OPEC members increased by 136,000 barrels per day month-on-month to 29.74 million barrels per day (mbpd). The reading mainly reflected much higher output from Saudi Arabia (August: 9.81 mbpd; July: 9.67 mbpd) and to a lesser extent in Iraq and Nigeria.