A global investment bank has increased its oil price forecast significantly following drone strikes on Saudi Arabian plants at the weekend in spite of official efforts to play down their significance.
The attack led to the interruption of production equivalent to more than five per cent of the world’s daily supply prompting a surge in crude prices on Monday.
Read more: Price of petrol to soar after attack on oil facilities
Oil prices gave up some of their gains subsequently after Saudi Arabia’s energy minister Prince Abdulaziz bin Salman said 50 per cent of its daily crude oil production cut by the attack has been restored.
He added that full production at the state-owned Saudi Aramco, which was the target of the attacks, was expected by the end of the month.
However, UBS investment bank suggested concerns about possible further attacks could drive up oil prices in spite of the attempt to reassure the markets that Saudi Arabia is a reliable producer.
“Considering limited spare capacity outside Saudi Arabia and risks of renewed attacks on Saudi energy infrastructure, a risk premium is likely to stay on oil prices in the foreseeable future,” said analyst Giovanni Staunovo.
UBS expects Brent crude to trade at $59 per barrel to $71/bbl over the next three months, up $6/bbl on its previous forecast.
Read more: North Sea oil and gas industry in best shape for years finds key report
The change to the estimate reflects the degree of uncertainty about the outlook for the oil market amid political tensions in the Middle East.
Earlier this month UBS slashed its forecast for Brent crude reflecting concerns that global trade tensions could weigh on demand. UBS said then it expected the Brent crude price to fall to around $55 per barrel over the subsequent six months.
Read more: Oil price forecast slashed amid trade war fears
Crude price developments will be monitored closely in the North Sea as the oil and gas industry emerges from a long downturn. Oil price rises could increase the appeal of investing in the North Sea but volatility may deter firms from committing to projects.
Consumers and businesses will be concerned that oil price increases could push up the cost of petrol and stoke wider inflationary pressures.
Brent crude sold for $63.87 yesterday afternoon, down $0.68/bbl on the day. It fetched around $60/bbl on Friday.
Separately, Aberdeen-based engineering giant Wood has won a contract to complete modification work on a bumper development in the Norwegian North Sea for Equinor.
While the value of the contract was not disclosed, the award provided a notable vote of confidence in Wood on the part of Equinor.
Earlier this year Wood was employed by the Norwegian giant to do modifications work on the Grane platform in the North Sea.
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