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The price of the crude oil managed to partially offset the massive jump of 7 dollars per barrel that was registered on Monday, following the alleged drone strikes by Yemeni rebels on Saudi Arabian oil facilities, which attribute to 5 per cent of the global output of the commodity. The price fell almost 3 dollars per barrel during Tuesday's trading session following the statement of Saudi Aramco’s Chief Executive Amin Naser claiming that Saudi Arabia is working towards restoring the production output to previous levels, that were generated before the attacks took place, by the end of September.
The tumble of the prices yesterday did not surprise investors, as the market expected the Saudi kingdom to use its massive oil reserves to fulfil its commitments to all of its clients this month. As you may recall from this week's opinion-piece that covered Saturday’s attacks in details, and outlined the likely ramifications for the oil market as a whole, the sudden surge in the price was unlikely to persist in the long-term.
Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman was cited by Reuters during a press statement in the city of Jeddah, as saying:
“Over the past two days we have contained the damage and restored more than half of the production that was down as a result of the terrorist attack. […] Oil supplies will be returned to the market as they were before 3:43 a.m. Saturday” [source]
Thus, the oil market can temporarily relax as the suddenly created disequilibrium on Monday will most likely disappear soon. Yet the danger of a political crisis in the Arabian Gulf region is still present, as US officials released new evidence on Monday demonstrating the sophistication of the attacks. In doing so, Trump's administration further alleged Iran for being the primary culprit of the drone strikes, despite the Houthi's claim of responsibility.
In our article from Sunday, it was further argued that the long-term consequences for the oil market depend on how the political situation is handled. If the spat between Washington and Teheran is to escalate, the newly created uncertainty for the future in the region is likely to result in permanent, heightened volatility in the oil prices. Presently the price of the WTI Crude Oil is trading at 59.00.
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