The big question around spike in oil prices is when Saudi supply will return to normal

NZ motorists can brace for higher fuel prices with good cause. The attack on Saudi oil facilities poses one of the greatest threats to oil production and supply in recent years.

Crude oil prices posted their largest-ever jump in a single day, as Saudi Arabia counts the damage caused by aerial strikes on its state-owned petroleum giant, Saudi Aramco.

The Aramco plants targeted are crucial to the company’s operations. If they are offline, for even a short while, it will drastically reduce the output of Saudi Arabia, the world’s biggest oil exporter.

This poses important questions: When will Saudi oil production return to its level before the attack? The country aims to restore part of its output today, but when production and supply will return to normal remains unclear.

The most challenging question is whether the US will mount a retaliatory attack directly. President Donald Trump says the US is “locked and loaded” but his firebrand former National Security adviser John Bolton has been sidelined and the US defence system is much more guarded.

Trump authorised the release of oil from the U.S. Strategic Petroleum Reserve of 640 million barrels while Saudi officials say  they may ship their own extra inventory to bolster supplies.

The first reports said Houthi drones attacked from Yemen. This must be regarded with scepticism. US satellite images report 17 separate strikes by cruise missiles and drones from  the northern Persian Gulf, which indicates the origin of the  attack was in Iran or Iraq rather than from Yemen, where the Houthi militia operates.

Allied intelligence suggests the militia lacks the sophisticated command and control structure capable of such an attack – let alone whether the originators of the drones and missiles would provide access to such complex weapons requiring careful target profiling and coordinates.

Iran rejects as “max deceit” the accusation by Secretary of State Mike Pompeo that it was responsible. It remains squeezed by American sanctions.

Iran has tried to inflict similar pain on regional rivals but has stopped short of a direct attack that might prompt a military response.  Now Teheran has dismissed the possibility of a meeting between its president, Hassan Rouhani, and  Trump at the United Nations next week.

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