Botched Attack On Saudis Causes Oil Price Decline, But Vaccine Effects Lend Support

Meanwhile, Total predicts oil will fall to $50-$60 per barrel: File Image/PixaBay

After four consecutive sessions of gains, crude prices on Monday declined when it was learned that weekend attacks on oil facilities in Saudi Arabia–which triggered a session peak above $70 per barrel–did not cause any damage.

Brent climbed as high as $71.38 per barrel after Yemen's Houthi forces fired drones and missiles at the heart of the Saudi oil industry on Sunday, including a Saudi Aramco facility at Ras Tanura vital to exports; upon word from Riyadh that there were no casualties or loss of property, it settled down $1.12 at $68.24.

West Texas Intermediate settled down $1.04 at $65.05 per barrel.

John Driscoll, director at JTD Energy Services, told media that the primary effect of the attacks was psychological: "They serve as a reminder that the Mideast is vulnerable and rife with tensions and rivalries that could overheat at any time."

Supporting prices on Monday was Washington approving a $1.9 trillion stimulus bill and positive economic data from the U.S. and China as economies continue to recover during the Covid vaccine rollout.

While those in the energy sector continue to express bullish sentiment due to the success of the vaccines, Patrick Pouyanne, chief executive of Total, pointed out that the government-mandated Covid lockdowns were so harmful to business and demand that it could take two years for the world economy to recover.

Therefore, he added, "I am not betting on prices staying at $70 a barrel, for me the right price is around $50-$60 a barrel."

Meanwhile, Pouyanne's colleague Mike Muller, head of Asia at Vitol, told media that with regards to oil's surge following the Organization of Petroleum Exporting Countries' (OPEC) surprise move last week to maintain supply cuts, "The market is telling us that OPEC+ have control.

"We're going to get a stock-draw that is going to accelerate through the second quarter and that's why the market is doing what it's doing."

Muller added that increasing demand could still push prices higher: "The very front of the market is still not motoring quite as much as we had expected out here in Asia, because the much-awaited demand surge from China is not yet an all-out surge; China is going to continue growing unabated in terms of its demand for fossil fuels."