WASHINGTON (DTN) -- In afternoon trade Friday, crude futures traded on the New York Mercantile Exchange and Intercontinental Exchange turned sharply higher, with both benchmarks clawing back more than 2.5% of value. The gains came amid reports that a key oil facility outside of Saudi Arabia's capital Riyadh was struck by six bomb-laden drones in an attack that sharply escalated geopolitical risk in a critical region for global oil production and transit.
The drone assault on Saudi oil infrastructure was once again claimed by the Iran-backed Houthi rebels in Yemen who, in recent weeks, escalated the frequency and intensity of attacks on the kingdom's energy installations. It remains unclear which oil facility was hit on Friday, but Al Jazeera reported earlier Friday morning Saudi Aramco's oil refinery outside of Riyadh has caught fire, which was eventually brought under control. A Houthi spokesperson warned Friday the attacks would continue as long as Saudi's "aggression and blockade" in Yemen continues, urging civilians to keep away from military installations and other potential targets.
This undoubtedly raises security concerns in the region that produces roughly 27% of the world's crude oil supplies.
Tensions in the Middle East have escalated since U.S. President Joe Biden on Feb. 5 removed Houthi rebels from the designated terrorist list, reversing Trump policy despite the number of high-profile terrorist attacks carried out by the group. Saudi Arabia's ministry of defense condemned the latest attack as an assault against "the security and stability of the world's energy supplies."
In market-on-close trade, April West Texas Intermediate futures spiked $1.42 to settle at $61.42 per barrel (bbl) after trading as low as $58.94 earlier in the session, and the international crude benchmark May Brent advanced $1.25 for a $64.53-per-bbl settlement. NYMEX April ULSD futures rallied 3.81 cents or 2.1% to close the session at $1.8223 gallon. An exception to the complex was the gasoline contact, with RBOB futures drifting lower in afternoon trading to finish little changed at $1.9431 per gallon.
Despite Friday's mostly higher settlements, all petroleum contacts posted steep weekly losses triggered by renewed concerns over global demand recovery amid Europe's troubled vaccine efforts and worse-than-expected economic data in the United States. France announced Friday a four-week lockdown in the capital city Paris and surrounding regions amid a resurgence of new COVID-19 infections triggered by more contagious variants of coronavirus. Similar moves were announced earlier this week by Italy and Poland at a time when both countries suspended the use of AstraZeneca vaccine due to associated health risks.
"Renewed lockdowns, stringent mobility restrictions and a rather slow vaccine roll-out in Europe have delayed the anticipated rebound until the second half of the year," said the International Energy Agency on Wednesday.
These factors are likely to weigh on the oil complex until more clarity emerges over the pace of U.S. re-openings and a breakthrough in vaccine distribution in the European Union.
Liubov Georges can be reached at email@example.com