U.S. Crude Skyrockets as Drone Attack Cripples Saudi Refinery

U.S. crude has surged on Monday, as an attack on a Saudi Arabian oil refinery as reduced Saudi oil production. In the European session, WTI futures for October delivery are trading at 60.11, or 9.6% on the day. How strong has the upward surge been? Crude touched a high of 62.78 in the Asian session, more than 15% on the day. This is the highest level we have seen since May 20.

Drone Attack Paralyzes Saudi Oil Production

It’s been a remarkable start to the week, as oil prices are up almost 10% on Monday. The catalyst for the huge gain was a weekend attack by Yemini rebels on a Saudi oil refinery, knocking out some 50% of Saudi Arabia’s daily oil output, which translates into 5% of the world’s daily oil production. Crude has broken past the symbolic 60- level in the European session and the upward momentum could continue as North American investors climb aboard, no doubt to share their jitters at these ominous developments.

Consolidation or Retracement?

Coming after an attack on a key oil production facility, the spike in oil prices is certainly not surprising. What is a trickier question is whether crude can consolidate or will it cough up some of these gains. I would not pay much attention to talk of oil at 100, but with plenty of unrest in the Middle East, the 70-level is within striking distance. I would not be surprised if the volatility continues in the North American session and perhaps into Tuesday as well.