LONDON • Oil prices slid yesterday, although the market remains on tenterhooks over the threat of a military response to the weekend attacks on Saudi Arabian crude oil facilities that halved the kingdom's output and prompted a price spike not seen in decades.
Last Saturday's attacks raised the prospect of a major supply shock in a market that in recent months has focused on demand concerns due to the pressure on global growth from the US-China trade war. Saudi Arabia is the world's top oil exporter and has been the supplier of last resort for decades.
Brent crude was down 0.5 per cent at US$68.66 a barrel at 0930 GMT (5.30pm Singapore time), and West Texas Intermediate was down 0.9 per cent at US$62.33 a barrel. Earlier, the crude benchmarks had both fallen by around 2 per cent.
On Monday, the prices surged nearly 20 per cent in intra-day trading in response to the attacks - the biggest jump in almost 30 years - before closing nearly 15 per cent higher at four-month highs.
State-owned producer Saudi Aramco has not given a timeline for the resumption of full output.
The attacks on Saudi Aramco's crude processing facilities in Abqaiq and Khurais cut production by 5.7 million barrels a day, the largest single supply disruption in half a century, and threw into question its status as supplier of last resort.
The fallout in Asia, the largest buyer of Saudi crude, has been varied, with some refineries expected to receive their allocated volumes for next month, and other importers being told of delays or being offered alternative grades.
The prospect of oil releases from strategic inventories in the United States, the International Energy Agency and some big-buying countries such as Japan has weighed on prices, but the geopolitical threat of retaliation in the Middle East is causing concerns.
"High stock levels mean that no shortage of supply is likely... On the other hand, there is a danger of further escalation, which would necessitate a substantial risk premium on the oil price," said Commerzbank oil analyst Carsten Fritsch.
US President Donald Trump said on Monday that it looked like Iran was behind the attacks, but stressed that he did not want to go to war. Teheran has rejected the charges that it was behind the drone strikes.
Relations between the US and Iran have deteriorated since Mr Trump pulled out of the Iran nuclear accord last year and reimposed sanctions on Iran's oil exports.
"It is not a great thing to say, but if something like this is going to happen, at least it happened at a time when there is a surplus in crude and US production is growing at such a fast clip," said Mr Tony Nunan, a Tokyo-based oil risk manager at Mitsubishi Corporation.