2 mins read

US Oil Prices Record Biggest One-Day Gain in More Than a Decade

The United States crude futures ended the day 15% higher at $62.90, a barrel, their largest climb in one day since January 2009. However, this was still way below their previous position when future opened Sunday evening following attacks on the Saudi Arabia’s oil industry.  The price jumps has immensely boosted shares of producers and comes at a time when strikes disrupted 5.7 million barrels a day of oil supply. There was also growing tension between the U.S and Iran after the latest attack on Saudi Arabia’s oil asset. This has in turn led to an increasing chance of more disruptions to the flow of oil around the world.

Monday changes were a sign of investors growing alarm at the scope of the attack in one of the largest crude exporter’s in the world. While the global economy is still slowing down, continued increase in prices could end up leading to a more expensive retail gasoline. Furthermore, there is a possibility of higher heating bills that would put more pressure on consumes while at the same time disrupting economic growth.  “I worry the world economy is in a much more fragile position in its ability to absorb this kind of price shock than it was a year ago,” said Saad Rahim, Chief Economist at Commodity Trading House Trafigura.

Saudi Arabia has already held a series of calls with other members of the Organization of the Petroleum Exporting Countries and other oil-producing allies. According to Saudi and OPEC officials, they were not going to respond with additional output.  The jolt to the market occurs after weeks of listed trading in oil thus underscoring the possibility of future attacks in the region. “This is what happens when somebody lights the spark. There is a lot of crude oil and one of the most geopolitically volatile areas on the market,” said Bob Yawger, Director of the futures division at Mizuho securities U.S.A.

Members of the IEA, with the U.S included have to hold emergency stocks of oil that could cover 90 days’ worth of lost imports.  This can be done as in June 2011, when the United States and 27 other countries acted to release 60 million barrels of oil from strategic reserves. The main aim of this action was to drive down prices during disruptions caused by the civil war in Libya. According to Oswald Clint, a senior analyst for Sanford. C. Bernstein and CO, the U.S holds around 600 million barrels of oil in reserve and other governments have a further 1.2 billion.

Even though a major oil shortage is not imminent, a long outage in Saudi Arabia may end up keeping oil prices elevated. This is because the market mostly depends on the kingdom to ramp up output whenever there is a crisis.  Furthermore, the ability of other OPEC members to boost output on such a short notice has declined. On the other hand, share producers in the United States are facing pressure from shareholders to show discipline instead of over investing in new production capacity.

Claire Jimmy

She is a part-time digital marketing consultant, part-time travel blogger, and full-time dreamer. He has three passions in life: Social Media, Travel and blogging. She has won many more blog awards and received many nominations as well. The creative blog writer with many years of experience.

Latest from Featured Posts

Copyright 2023 todaypost. All Rights Reserved.