Crude oil prices have surged more than 19 per cent after a drone strike on a Saudi Arabian oil facility wiped out about 5 per cent of global supplies.
Brent prices jumped as much as $11.73 to $71.95 a barrel in early trading in Singapore.
State energy producer Saudi Aramco lost about 5.7 million barrels per day of output on Saturday after 10 unmanned aerial vehicles struck the world's biggest crude-processing facility in Abqaiq and the kingdom's second-biggest oil field in Khurais.
For oil markets, it's the single worst sudden disruption ever, surpassing the loss of Kuwaiti and Iraqi petroleum supply in August 1990, when Saddam Hussein invaded his neighbour. It also exceeds the loss of Iranian oil output in 1979 during the Islamic Revolution, according to data from the U.S. Department of Energy.
New Zealand petrol prices could reach a nightmare $3 a litre following the attacks on Saudi Arabia's oil facilities, economist Cameron Bagrie said today.
However, the true impact the explosions would have on the oil industry remains to be seen.
As of Monday morning, the "horror scenario" at this stage would see fuel prices reach $3 at the pump, economist Cameron Bagrie told MediaWorks.
"If you look at the imported component of the petrol prices, it's about 75 cents.
"Let's keep the maths simple, let's say that oil prices basically double, that imported component will go from 75c to $1.50."
Attack comes at time of economic slowdown
"The global economy can ill afford higher oil prices at a time of economic slowdown," Ole Hansen, head of commodities strategy at Saxo Bank A/S in Copenhagen, said by email.
Saudi Arabia can restart a significant volume of the halted oil production within days, but needs weeks to restore full output capacity, people familiar with the matter said. The
kingdom - or its customers - may use stockpiles to keep oil supplies flowing in the short term. Aramco could consider declaring itself unable to fulfill contracts on some
international shipments -- known as force majeure -- if the resumption of full capacity at Abqaiq takes weeks.
That would rattle oil markets and cast a shadow on Aramco's preparations for what could be the world's biggest initial public offering. It's also set to escalate a showdown pitting
Saudi Arabia and the US against Iran, which backs proxy groups from Yemen to Syria and Lebanon.
Iran-backed Houthi rebels in Yemen claimed credit for the attack, but U.S. Secretary of State Mike Pompeo blamed Iran directly.
The Trump administration said it's ready to deploy the nation's emergency oil reserves and help stabilise markets if needed.
Z Energy chief executive Mike Bennetts said today that if the impact of the attacks was only felt short term then the outlook was promising.
"Oil in storage is quite high at the moment, so if this was to go on for a week or so it could be easily managed," he told Mike Hosking Breakfast on Newstalk ZB.
"If it's say a short term disruption, it's probably worth up to $5 a barrel, or about 5 cents a litre at the pump.
"If it's a more long term disruption, we could be looking at something around $10 a barrel, or 10 cents a litre."
BP spokesman Gordon Gillan said the attacks could mean higher prices at the fuel pump.
"Our prices are reflective of the barrel price, on international markets and other influencing factors, so it's possible there could be an impact on local prices later this week. But we wouldn't want to speculate."
Asked whether any change to global oil prices would necessarily mean an immediate increase in petrol prices here, he said: "We review our BP Connect prices every day so our prices are as competitive as possible.
"It could change tomorrow, it could be the next day."
Meanwhile, jet fuel prices will go up if there is any increase in the cost of crude oil and this could lead to fares rises.
Fuel makes up at least 25 per cent of airlines' operating costs and jet fuel is now at $US77 a barrel, nearing the top of the range for carriers to hold prices. Airlines will cut capacity if fuel prices rise steeply and this too can lead to fare increases.
This year Air New Zealand expects to spend $1.3 billion on fuel, based on an average jet fuel price of $75 a barrel.
A Government spokesman said there would be no comment on the drone strikes in Saudi Arabia until tomorrow.
- With Bloomberg