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U.S. Oil Passes 2-Year High On Saudi Refinery Attack, OPEC Agreement

A weekend attack on a Saudi refinery, OPEC production cuts and a roaring China economy have U.S. crude prices trading at their highest levels in more than two years Monday.

Global oil prices hit their highest levels since the pandemic began in January of last year, while U.S. crude passed a two-year peak, following a weekend attack on a key Saudi Arabian refining facility 

Rebel Yemeni Houthi troops claimed responsibility for the attack, which included drone and missile strikes, on the Ras Tanura facility on the Persian Gulf, the Kingdom's oldest and largest refinery and a key hub for its market-leading exports. 

There were no reported injuries in the attack, but the outages that followed triggered extended price increases in Asia trading as officials in Riyad said the ultimate target was "the security and stability of energy supplies to the world, and therefore, the global economy."

"This is the second attack on the country’s oil infrastructure this month, with an attack on oil facilities in Jeddah on 4 March," said ING's head of commodity strategy Warren Patterson. "Clearly, the market was already digesting the surprise decision from OPEC+ to keep output levels over April largely unchanged (with the exception of Russia and Kazakhstan). 

"Adding only further support to the market was the constructive Chinese trade data released over the weekend, along with news that the US$1.9t US stimulus package was passed by the Senate," he noted. "This suggests that we could see further upside in the market in the near-term, particularly as the market probably now needs to be pricing in some sort of risk premium, with these attacks picking up in frequency."

WTI crude futures for April delivery, the benchmark for U.S. oil and gas prices, were marked 35 cents lower on the session at $65.74 per barrel, paring gains from $67.98 per barrel, levels last seen in October 2018 during Asia-hours trading.

Brent crude contracts for May delivery, which are more tightly-aligned to global prices, rose 19 cents per barrel to $69.55 in early European trading, after hitting a January 2020 high of $71.38 during the Asia session.

U.S. oil prices have surged more than 80% over the past six months, boosted by a combination of improving global energy demand, the ongoing rebound in China crude imports and OPEC's decision to extend its current pact on production cuts into the month of April. 

U.S. prices have also boosted by last week's report on domestic crude stocks from the Energy Department, which showed a record 21 million barrel decline linked to the shuttering of refineries in Texas during the worst of the winter storms that gripped the region late last month.