Global risk heightened over the weekend as OPEC’s largest exporter of crude oil, Saudi Arabia, reported that two of its major oil facilities were attacked by drones, pre-dawn on Saturday.
The attack reportedly knocked out more than 50.0% of Saudi’s crude oil output – 5.0% of global oil supply – and cut output by 5.7 million barrels per day (mbpd).
Though a sad development for global politics, Nigeria is one of the few countries that stand to gain from the current unrest in the Middle East as the attack and fears of future attacks is positive for global crude oil prices, albeit in the short term. As at the time of writing, Brent oil prices have jumped 13.0% and at some point, crossed the $70.0/b.
Additionally, the shortfall that is to arise from attack means Nigeria has a window to temporarily grow its output above the current OPEC agreed output limit and prop-up revenue from the windfall.
Going forward, crude oil price outlook remains a function of geopolitical uncertainties as accusations and counter-accusation between the U.S. and Iran as well as hostility between S/Arabia and Yemen roils on. Additionally, while the timeline for S/Arabia to restore production to the pre-attack level of c.10mbpd remains unclear, we imagine that oil prices at the north of $70.0/b may be short-lived considering that the US Strategic reserve of 644.8mbpd can last for 6months at 5.0mbpd.