Oil jumps 2.4% after attack on Saudi field

A pump jack and pipes at an oil field near Bakersfield, California.
Lucy Nicholson | Reuters

Oil prices on Monday after a weekend attack on a Saudi oil facility by Yemen's Houthi forces and as traders looked for signs that top economies would take measures to counteract a global slowdown.

Prices were limited by a downbeat report by the Organization of the Petroleum Exporting Countries (OPEC) that stoked concerns about growth in oil demand.

Brent crude, the international benchmark for oil prices, was up 95 cents, or 1.6%, at $59.59 a barrel. U.S. West Texas Intermediate (WTI) crude futures gained $1.34, or 2.4%, to settle at $56.21 a barrel.

A drone attack by the Houthi group on an oilfield in eastern Saudi Arabia on Saturday caused a fire at a gas plant, adding to Middle East tensions, but state-run Saudi Aramco said oil production was not affected.

"The oil market seems to be pricing in again a geopolitical risk premium following the weekend drone attacks on Saudi Arabia, but the premium might not sustain if it does not result in any supply disruptions," said Giovanni Staunovo, oil analyst for UBS.

Iran-related tensions appeared to ease after Gibraltar released an Iranian tanker it seized in July, with the vessel sailing for Greece, though Tehran warned the United States against any new attempt to seize the tanker in open seas.

A rally in equities from growing expectations that global economies would take actions to counteract slowing growth also helped oil, which often follows stock prices.

"The death of the global economy has been greatly exaggerated and the market is starting to realize that," said Phil Flynn, an analyst at Price Futures Group in Chicago.

China's announcement of key interest rate reforms over the weekend has fueled expectations of an imminent reduction in corporate borrowing costs in the struggling economy, boosting share prices on Monday.

OPEC, meanwhile, cut its forecast for global oil demand growth in 2019 by 40,000 barrels per day (bpd) to 1.10 million bpd and indicated the market would be in slight surplus in 2020.

The rare move for OPEC to give a bearish forward view on the market outlook limited oil gains on the day, but it could set the stage for tighter supplies down the road.

"Such a bearish prognosis will heap more pressure on OPEC to take further measures to support the market," said Stephen Brennock of oil broker PVM.