Crude prices were surging on Monday as the rift between Saudi Arabia and the United States heats up. As Washington considers sanctions against Riyadh over a missing journalist, the future of the oil market is in question.
Brent oil was trading 80 cents higher on Monday at $81.25 per barrel, while US benchmark WTI jumped 53 cents to $71.87. Investors are alarmed over possible US sanctions against Saudi Arabia after the disappearance of Washington Post journalist Jamal Khashoggi.
Turkish authorities have claimed they have proof the journalist was tortured, killed and dismembered at the Saudi consulate in Istanbul.
“Growing tensions over the disappearance of journalist Jamal Khashoggi at the Saudi consulate in Istanbul has proved supportive for oil prices,” said ING commodities strategist Warren Patterson, as quoted by Reuters.
Saudi Arabia has said it would retaliate if any sanctions are imposed. “This has raised concerns that the Saudis may use oil as a tool for retaliation if any sanctions or other action is taken against it,”Patterson said.
Oil is still off the $86 peak seen last week before the sell-off on the US markets. However, if US President Donald Trump goes through with the promise of “severe punishment” against Riyadh if it’s proven the Saudis ordered the murder of Khashoggi, oil prices could skyrocket.
“If US sanctions are imposed on Saudi Arabia, we will be facing an economic disaster that would rock the entire world,” Turki Aldakhil, the general manager of Saudi Arabia-based Al Arabiya television wrote in an op-ed. The media is owned by the royal family.
“It would lead to Saudi Arabia’s failure to commit to producing 7.5 million barrels. If the price of oil reaching $80 angered President Trump, no one should rule out the price jumping to $100, or $200, or even double that figure.”
Trump has repeatedly blamed OPEC leader Saudi Arabia for propping up oil prices, which have translated to higher gasoline prices for US consumers. It is a problem for the president and the Republican leadership with US midterm elections coming up in less than a month.