Mumbai: Crude oil surged nearly 20% on Monday following drone attack on Saudi Arabia's oil facilities forcing the kingdom to cut its oil output by half.

International benchmark Brent crude futures soared $11.73 to $66.91 per barrel. US West Texas Intermediate crude futures jumped $8.49 to $59.76 per barrel.

The reported strike by 10 drones at Saudi Aramco’s Abqaiq and Khurais oil facilities have disrupted more than half of Saudi Arabia’s oil capacity or 5.7 million barrels per day (mbpd). The US has blamed Iran for the attacks even as Yemen’s Houthi rebels claimed credit. Some oil traders have already begun to speculate if oil prices will cross the $100-mark yet again.

According to Emkay Research report, the production halt is a preventive measure and in 48 hours operations could normalise. However, concern that important Saudi oil facilities are now vulnerable to attacks by rebels would increase the geopolitical risk premium on oil prices. Saudi Arabia and its allies may also retaliate, leading to more tensions, and a broader clash with Iran can be severe. The US may toughen its stance on Iran, contrary to the belief that the Iran-US standoff may have subsided after the recent resignation of US National Security Advisor John Bolton, the report added.

"The immediate range for Nymex crude will be $56 to 63 per barrel. With USA accusing the Iranian government of orchestrating the attack and Iran in turn threatening war, there by further destabilising the region at large and further impacting future supplies, the oil prices are expected to remain firm" said Pritam Kumar Patnaik, Head Commodities, Reliance Commodities.

A sudden increase in global prices will affect India’s oil import bill and its trade deficit. Every dollar increase in the price of oil raises the import bill by 10,700 crore on an annualised basis. India spent $111.9 billion on oil imports in 2018-19.

State-run oil marketing companies (OMCs) Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd, however, see limited impact on crude supplies following the drone strikes, Mint reported.

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