Multiple drone attacks on key Saudi Arabian oil facilities over the weekend, have shaken up world markets.
Two crude processing facilities were hit: Abqaiq, the world's largest processing plant, operated by Saudi oil giant Aramco and Khurais oil field.
The attacks started a series of fires that knocked 5.7 million barrels per day (bpd) off production, over half of the kingdom's output and equivalent to more than 5% of the world’s daily supply.
Riyadh’s stock exchange, the Tadawul, suffered a 2.3% drop as it opened on Sunday morning.
The oil price has seen the biggest one-day rise since the 1991 Gulf War, jumping almost 20% on Monday but falling back later. Brent crude, the international benchmark jumped to $71.95 a barrel at one point.
U.S. West Texas Intermediate futures climbed as much as 15.5% to $63.34. Prices eased after US President Trump authorised the use of his country's emergency stockpile to ensure stable supply.
Gold prices rose as the attacks boosted demand for the safe-haven bullion.Spot gold rose by 1 percent to $1,503.70 per ounce while U.S. gold futures were up 0.75 percent at $1,510.75 per ounce.
Saudi Aramco reportedly aims to restore about a third of its crude output by Monday. However, experts have said it could take weeks or even months before the oil giant restores the majority of its output at Abqaiq.
Goldman Sachs said an extended oil outage could push Brent crude prices north of $75 per barrel while Sarah Cottle, global head of market insight at S&P Global Platts told CNBC if the outage continues for a prolonged period of time, oil prices could easily rise over $80 a barrel.
Alan Gelder, vice president for refining, chemicals and oil markets at Wood Mackenzie, wrote in a note:
“This attack has material implications for the oil market, as a loss of 5 million barrels per day of supplies from Saudi Arabia cannot be met for long by existing inventories and the limited spare capacity of the other OPEC+ group members.”
Yemen’s Houthi rebels claimed responsibility for the attack, saying it was one of their largest attacks ever inside the kingdom. They also said they conducted the strikes -- using 10 drones -- in retaliation for Saudi Arabia's military campaign against the group in Yemen.
Secretary of State Mike Pompeo in a tweet Saturday accused Iran of having "launched an unprecedented attack on the world's energy supply", while President Donald Trump later said the US is "locked and loaded depending on verification"and is "waiting to hear" from the kingdom about who attacked its oil facilities. Tehran denied the US allegations that it was behind the attacks.
Analysts warn the attacks could also hurt the prospects for Saudi Aramco's proposed giant share flotation. Reuters reported last week that Riyadh plans to list 1% of Aramco on the Tadawul before the end of this year and another 1% in 2020, as first steps ahead of a public sale of roughly 5% of the state oil giant.
U.N. Yemen envoy Martin Griffiths told the Security Council on Monday it was “not entirely clear” who was behind the strike but he said it had increased the chances of a regional conflict.
Oil prices fell after Reuters reported that Saudi Arabia will repair damage to its oil refineries from a drone attack within two to three weeks, rather than the months previously thought.
The price of Brent crude fell around nearly six per cent to $65.15 in the minutes after the news. The kingdom is already close to restoring 70 per cent of the 5.7m barrels of oil a day capacity that it lost in the attack, the news agency said.
Prince Abdulaziz bin Salman, Saudi Arabia’s energy minister, said that Saudi Aramco will be able to meet all of its commitments to customers this month by tapping the nation's crude oil reserves.
However, analysts are sceptical.