Saudi Arabia Attack

Oil traders and analysts expect prices to jump at least $5 a barrel Monday after a strike on a key facility cut Saudi Arabia’s production by half, pulling some 5% of world supply off the market.

Saudi Aramco lost about 5.7 million barrels per day of output after several unmanned aerial vehicles on Saturday struck the world’s biggest crude-processing facility in Abqaiq and the kingdom’s second-biggest oil field in Khurais. Saudi Arabia is likely to restore almost half the oil production lost, though a full resumption may take weeks. The Trump administration is ready to deploy the nation’s emergency oil reserves and help stabilize markets if needed.

Trading starts at 6 p.m. New York time. In early currency moves in Asia, the Norwegian krone and Canadian dollar strengthened — both are exposed to oil sentiment.

Oil sank 2.1% in London to $60.22 a barrel last week and 3% in New York to $54.85, amid concerns that slowing demand growth may augur another supply glut. Geopolitics wasn’t much of a concern in traders’ minds, but that’s all changed now.

“There is almost no geopolitical risk priced into oil markets,” Joseph McMonigle, senior energy analyst at Hedgeye Risk Management LLC, said in a note. Markets have been “focused solely on the macro and trade narratives,” he said.

The Attack on Saudi Oil Plant Is What Everyone Feared: Oil Strategy

How Long?

While most analysts agree that prices will spike initially, the duration of the outage is key. Saudi Arabia has millions of barrels stored in locations around the world, which they can draw down to replace the lost production. A rally could also be tempered if the U.S. and other countries release oil from their strategic reserves to ease the shortfall.