Oil prices set to double after Saudi Arabia attack - expert

Oil prices are tipped to rise when the markets open on Monday.

Two of Saudi Arabia's biggest facilities have been damaged in drone strikes. The major oil-producing country's production has been halved as a result.

Economist Cameron Bagrie told Newshub New Zealand will likely feel the impact.

"It's a little bit like having the All Blacks play with 13 or 14 players, or taking Steve Smith out of the Australian cricket team - this is a major facility."

An analyst for oilprice.com suggested barrels could increase from the present US$55 to more than US$100.

"While Aramco is confident that it can recover quickly, if it can't, however, the world could face a production shortage of as much 150MM barrels per month," wrote Michael Kern, "an outcome which could send oil prices into the triple-digits."

Yemen's Houthi rebels have claimed responsibility. The US believes Iran is behind the attack.

"Iran has now launched an unprecedented attack on the world's energy supply," said US Secretary of State Mike Pompeo.

Prince Abdulaziz bin Salman bin Abdulaziz, Saudi Arabia's Energy Minister, said the strikes didn't cause any injuries - but preliminary estimates suggest 5.7 million barrels a day of oil production have been lost, and the supply of ethane and natural gas cut by about half.

Bagrie says there are questions about how fast Saudi Arabian production can recover.

"We haven't seen this sort of attack since old Saddam Hussein fired a few Scuds off towards Saudi Arabia. This is pretty substantial - I think the markets are going to remain on edge for a little bit until we get a bit of clarity."

But the method of the attack - drones - doesn't bode well for the future.

"Can production be resumed quickly? And will there be more attacks? This one looks to be reasonably sophisticated, which is a bit of a concern in regards to what it suggests about the potential for more attacks."

Cameron Bagrie.
Cameron Bagrie. Photo credit: The AM Show

BP told Stuff prices at the pump might rise later in the week.

The civil war in Yemen has been raging since 2015, with tens of thousands dead - many of them civilians. On one side is the US and Saudi Arabia, who back the Yemeni government, and on the other Houthi rebels, who are believed to be backed by Iran.