Crude oil futures prices jumped 4 percent on Friday after a thwarted attack on a massive oil facility in Saudi Arabia rattled a market already jittery about supply disruptions in Nigeria and Iran's nuclear ambitions.
Saudi Arabia is the world's largest oil producer, with output of about 9.5 million barrels per day, or 11 percent of global consumption. The target of the attack, the Abqaiq oil complex in eastern Saudi Arabia, processes about two-thirds of the country's oil before it is exported.
Suicide bombers in explosives-packed cars attacked the heavily guarded facility but were foiled when guards opened fire, detonating the vehicles and killing the attackers, Interior Ministry spokesman Lieutenant-General Mansour al-Turki told reporters. The vehicles exploded outside the first of three fences around the sprawling complex, al-Turki said.
Saudi oil minister Ali Naimi said the attack caused "a small fire" that was brought under control and that operations were not affected.
While terror attacks are not new to Saudi Arabia -- there were two highly publicized attacks against oil company offices and employee-compounds in the spring of 2004 -- analysts said Friday's action was noteworthy because of how close the perpetrators came to a facility integral to the flow of oil.
"It's new in the sense that this is the boldest attempt to strike at the heart of a Saudi oil-production complex," Eurasia Group oil analyst Antoine Halff said. "So far they had been confined to office buildings and housing units."
"At the same time, what this attack demonstrates is not just how much the Saudi oil machine is a target for attacks, but also how prepared the Saudi oil company and military are, and how effective they are at thwarting attempts to disrupt oil production and exports," Halff added. "There are two sides to this."
Light sweet crude for April delivery surged as high as US$63.25 a barrel before settling at US$62.91, an increase of US$2.37 on the New York Mercantile Exchange. Brent crude futures for April delivery jumped US$2.06 to US$62.60 on London's ICE Futures exchange.
A Saudi journalist who arrived at the scene soon after an explosion said guards exchanged fire for two hours with two militants outside the facility. He also told reporters that he saw workers repairing a pipeline. He spoke on condition of anonymity because of the sensitivity of the situation.
UBS energy economist Jan Stuart said the reaction on oil markets was "measured" given the prominence of the Abqaiq facility and the ability of the attackers to get so close to it.
Aside from its total output, Saudi Arabia is a vital supplier to the global market because it is the only country with significant spare production capacity. If necessary, Saudi Arabia says it could quickly boost production by 1.5 million barrels a day.
By contrast, there is no other country that can add meaningful output to offset an unexpected disruption.
The emergency supply of last resort would be the 4 billion barrels of stocks that the International Energy Agency lays claim to.
Nymex gasoline advanced by US$0.0372 to finish at US$1.5506 a gallon (US$0.4096 per liter), while heating oil gained US$0.0641 to close at US$1.7267 a gallon. Natural gas futures were even at US$7.45 per 1,000 cubic feet (US$0.2631 per cubic meter).
Oil prices had already started the day higher as persistent concerns over Nigerian supply disruptions and Iran's nuclear program overshadowed US government data showing gains in domestic crude supplies.