The Saudi-led military coalition fighting in Yemen said that the attacks early on Sunday did not result in any casualties, though did cause damage to civilian vehicles and homes. Later on Sunday, an aerial attack struck an oil facility in the Saudi port city of Jeddah, resulting in a fire, though again without any casualties.
In addition to the attack, reports that the European Union is weighing an embargo on oil imports from Russia in line with its western allies has also pushed prices up. While EU nations had previously opposed the ban, Baltic countries have been persistent in advocating it as Russia’s unprovoked attack on Ukraine continues.
On Monday, Brent crude rose 4.5% to $112.75 per barrel, while US light crude was up 4.7% to $109.66 in electronic trading on the New York Mercantile Exchange.
The Russia-Ukraine conflict has already sent oil prices above $100 per barrel for the first time since 2014. On Thursday, some prices soared as high as $105 following Russia’s launch of a broad offensive against Ukraine. In the early hours of the morning, explosions were heard near major Ukrainian cities, including the country’s capital, Kyiv.
Following the attack, Brent crude oil — the global benchmark — jumped by more than 8%, reaching $105.50 early Thursday. Meanwhile, US oil prices climbed to over $99.
RSM chief economist Joe Brusuelas warns that the war between Russia and Ukraine could ultimately lead to oil prices surging as much as 20% to $110 per barrel. This would cause consumer prices in the US to surge above 10% on an annual basis. This is the highest figure since October 1981.
"The price of oil has almost doubled since the start of last year and, given current tensions, is poised to move higher. The potential for a broader energy shock to the global and U.S. economies should Russia invade Ukraine has added to a combustible mix of factors that is causing inflation to accelerate in the United States and abroad," said Brusuelas. "That risk carries with it the potential to slow down growth."
According to Refinitiv, BP posted an underlying replacement cost profit of $3.3 billion for the third quarter, a figure which surpasses analyst predictions. The $3.3 billion figure compares to a $2.8 billion net profit in the previous quarter and $100 million for the same period last year when the pandemic saw oil prices collapse. In 2021, Brent crude prices have increased by approximately 60% so far.
In the company’s earnings report, CEO Bernard Looney said, “Rising commodity prices certainly helped, but I am most pleased that quarter by quarter, we’re doing what we said we would - delivering significant cash to strengthen our finances, grow distributions to shareholders and invest in our strategic transformation.”
However, BP also reported a headline loss of $2.5 billion for the third quarter, “driven by significant adverse fair value accounting effects.” Consequently, BP took a $6.1 billion hit which it attributed to the “exceptional increase in forward gas prices towards the end of the quarter.”
The recent fall in oil prices will present challenges and opportunities for the Middle East and North Africa (MENA), according to the latest regional report by the Institute of International Finance (IIF).
"While overall growth in the oil exporting countries will moderate and their large fiscal surpluses will decline or shift to significant deficits, low oil prices may encourage these countries to accelerate and deepen structural reform efforts to improve energy efficiency and diversify their economies," said George Abed, Senior Counsellor and Director for Africa and the Middle East." Non-oil exporting countries in the region will benefit from the fall in oil prices through reduced oil import bills and lower fuel subsidies."
The IIF said that the 40% oil price drop from 2014 prices implies a massive shift in external and fiscal accounts. Exports from the MENA oil exporters will be reduced by $300 billion (€280 billion) in 2015. For the Gulf Cooperation Council countries (GCC), the aggregated current account surplus will shrink from $266 billion (€250 billion) in 2014 to about $40 billion (€38 billion) in 2015, and the fiscal position will shift from a surplus of 4.6% of GDP to a deficit of 7.4%.
The IIF projected average growth in the Middle East and North Africa (MENA) region will pick up slightly from 2.8% in 2014 to 3.2% this year, driven by the recovery in Egypt, Morocco, and Iran.
The IIF reduced their growth forecast for the GCC by 0.4 to 3.4% in 2015. However, growth outside the oil sector will remain strong at 4.5%, only slightly lower than last year.
For more on the oil price debate, read our Energy Economics roundtable here
