By Jhoo Dong-chan
International oil prices are likely to continue on an upward spiral in the wake of oil supply disruptions triggered by Saturday's drone attacks on Saudi Arabian oil faculties, according to market experts, Monday.
They expect that this will lead to a spike in local gasoline and diesel prices, putting an additional burden on the Korean economy. Gasoline and diesel prices here have risen sharply following the government's decision to terminate a six-month tax cut on fuel in August.
International oil price hikes are not expected to last long but the experts urged the government to closely monitor oil supplies from the Middle East noting Saudi Arabia is Korea's largest crude oil supplier.
According to online oil prices tracker oilprice.com, Monday, Brent Crude Oil, the international benchmark, gained almost $12 per barrel, or 20 percent, reaching up to $71.95 a barrel in the wake of the attacks on the oil processing facilities in Saudi Arabia.
The price eased back to below the $70 level, but this was the biggest jump in 28 years since August 1990 when Iraq invaded its southern neighbor Kuwait.
"The attacks are estimated to affect about 5 percent of the global daily output. That's a huge amount of oil," said an official from the Korea Center for International Finance.
"Some said the price could even reach up to $100. The attacks could also exacerbate geopolitical risks in the Middle East. The government should closely monitor further developments."
KB Securities analyst Kim Doo-un said it was inevitable for oil prices to soar in the short term but this won't lead to a long-term upward trend.
"West Texas Intermediate oil prices are expected to gain up to $10 a barrel for a while. Riyadh said it will release its oil reserves to fill the gap, but an imbalance between supply and demand could exist for a short period," Kim said.
"However, I don't think this will lead to a long-term rise in international oil prices. International Energy Agency member states, including the U.S., will release their reserves if the situation continues for a longer period."
At an emergency meeting Monday, the Ministry of Trade, Industry and Energy said the government will "closely monitor the development and will release oil reserves if necessary."
According to Saudi Arabia's state-run energy giant Aramco, multiple projectiles, believed to be drones, struck its Abqaiq oil processing facility.
U.S. Secretary of State Mike Pompeo claimed over the weekend Iran was responsible for the attacks after Yemen's Iran-aligned Houthi rebel group claimed responsibility.
Tehran immediately denied the allegations.
According to the Korea Petroleum Association, Korea imported 323.17 million barrels of crude oil from Saudi Arabia last year.
The figure accounted for about 29 percent of the nation's entire oil imports.