LONDON – The price of crude oil fell on Tuesday after shooting up 15 percent the day before, as Saudi Arabia announced that it had restored more than half the production that had been affected by two drone attacks on its oil facilities and fears of a supply shortage on the world market diminished.
A barrel of Brent crude, the European benchmark, ended the Tuesday session in the London futures market at $64.65, 6.33 percent below its closing price on Monday, while West Texas Intermediate crude dropped 5.7 percent to $59.34 per barrel.
The attacks on Saturday, for which the Iran-backed Houthi rebels in Yemen claimed responsibility, cut production by Saudi Arabia’s Aramco state petroleum company by about 5.7 million barrels per day, which represents about half the country’s production and about 5 percent of world production.
The view that the Saudi oil industry will get back to normal sooner than expected contributed to correcting the sharp rise in crude prices on Monday, when they made their largest daily jump since the 1990 Gulf War.
At first, fears abounded that Saudi refineries would take months to overcome the production crisis, but the market now appears confident that Aramco facilities will once again be pumping at full capacity before the end of September.
Saudi Energy Minister Prince Abdulaziz bin Salman said that authorities are working to attain daily production of 11 million barrels by the end of the month and 12 million per day by the end of November.
US Energy Secretary Rick Perry said Tuesday that he is of the opinion that the petroleum market is more resilient now than it was a decade ago, and thus there are better guarantees of maintaining production amid the crisis caused by the drone attacks.
The sharp rise in the oil price on Monday benefitted the shares of energy firms on the London stock market but it hurt those of airlines and tour operators, among others, given their dependence on fuel prices.
Despite the sudden and sharp moves in crude prices so far this week, however, experts say that this will have no direct effect on consumers since the crisis will not last very long.
The United States has blamed Iran for the attack on the Saudi refineries, which has aggravated even further the already tense relations between Washington and Tehran.
The supreme leader of the Islamic Republic of Iran, Ali Khameini, has ruled out any kind of negotiations with Washington.
US President Donald Trump, meanwhile, has said that he does not want war with Iran, although he has also warned that the United States is very well prepared for any conflict.