Attack on Saudi oil facilities

Saudi Arabia, the largest supplier of crude oil to Korea, shut down about half of oil production Saturday following a series of drone attacks on two of its key installations. The closure will affect 5.7 million barrels of crude oil production a day, about 5 percent of the world’s daily total. It is apparent that international oil prices will rise for the time being.

Crude prices spiked on international markets immediately. The futures price of Brent crude soared to $71.95 per barrel on the Singapore Exchange early Monday morning, up nearly 20 percent from the previous trading day. West Texas Intermediate for October delivery also began trading with prices more than 15 percent higher on the NYMEX.

Iran, which is in conflict with the United States, is allegedly behind the recent strikes on the Saudi oil facilities. What’s vital for Korea, however, is not guessing about the political background but dealing with immediate concerns as it imports about 30 percent of its crude from Saudi Arabia. The nation, which produces not a drop of oil, will prove to be especially vulnerable to the near-paralysis of the core facilities of its largest supplier.

Korea imports about 3 million barrels of crude oil a day, refines and uses part of it at home and exports the rest. The nation’s export of petroleum and petrochemical products amounted to $96.82 billion in 2017, second only to the export of semiconductors. That explains why the rise in crude prices is likely to have a considerable adverse effect on the already struggling economy.

Seoul imports crude oil on a long-term contract basis to secure a stable supply. At stake, however, is how rapidly Saudi Arabia can rebuild the destroyed facilities. The government and businesses should closely monitor international supply and demand.