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Smoke billows from an Aramco oil facility. Drone attacks sparked fires at two Saudi Aramco oil facilities. Photo: AFP/Getty Images

Crude oil prices are expected to surge when Asian markets reopen Sunday night (U.S. time) as traders respond to Saturday's attacks against major oil processing and production sites in Saudi Arabia.

Why it matters: The alleged drone strikes, which took large volumes of production offline, are stark evidence of security risks facing OPEC's largest producer and the world's largest crude oil exporter.

  • Saudi officials say the strikes have cut production by 5.7 million barrels per day — about 50% of the kingdom's total output and 5% of global supplies.
  • It's unclear how quickly production will resume, but Saudi officials say they will use their stockpiles to keep meeting customer demand.
  • Yemen's Iranian-backed Houthi rebels have claimed credit for the attacks, while U.S. Secretary of State Mike Pompeo directly blamed Iran.

What's next: Brent crude oil prices were roughly $60 per barrel heading into the weekend. The size and length of the expected spike will partly depend on how fast the Saudis can revive lost output.

  • Rapidan Energy Group said that even if that happens quickly, "such a brazen attack by an Iranian proxy on the crown jewel of the Kingdom of Saudi Arabia’s energy system will raise the overall geopolitical risk premium."
  • The Eurasia Group, in a note Saturday night: "A small $2–$3 [per barrel] premium would emerge if the damage appears to be an issue that can be resolved quickly, and $10 if the damage to Aramco’s facilities is significant [leading] to prolonged supply outages."
  • S&P Global Platts Analytics estimates a rise of at least $10 and perhaps much more. Dangers to Middle East supply and spare production capacity could "see prices test $80/b despite Saudi Arabia [on Saturday] claiming production and exports will not be significantly impacted."

The intrigue: The attacks could mean new headwinds for the Saudis' revived plans for the initial public offering of a slice of state oil giant Aramco.

  • The Atlantic Council's Randolph Bell told Axios in an email Saturday that if the disrupted output is not brought back online quickly, it would "raise questions about Aramco’s resiliency to geopolitical threats."

Bell, who heads the think tank's Global Energy Center, adds:

  • "But even if the interruption is relatively short and Saudi benefited from the presumed bump in the price of oil — which, under other circumstances, would raise Aramco's IPO valuation — the attacks are far more likely to remind investors of the geopolitical risk the company faces and ultimately hurt the IPO."

Go deeper: Saudi oil sites hit by drone strikes: U.S. blames Iran

Editor's note: This post has been clarified to note that it's unclear whether the attacks were committed by drones or another means.

Go deeper

Trump grants flurry of last-minute pardons

Photo: Jabin Botsford/The Washington Post via Getty

President Trump issued 73 pardons and commuted the sentences of 70 individuals early Wednesday, 11 hours from leaving office.

Why it matters: It's a last-minute gift to some of the president's loyalists and an evident use of executive power with only hours left of his presidency. Axios reported in December that Trump planned to grant pardons to "every person who ever talked to me."

Trump revokes ethics order barring former aides from lobbying

Photo: Spencer Platt via Getty

Shortly after pardoning members of Congress and lobbyists convicted on corruption charges, President Trump revoked an executive order barring former officials from lobbying for five years after leaving his administration.

Why it matters: The order, which was signed eight days after he took office, was an attempt to fulfill his campaign promise to "drain the swamp."

  • But with less than 12 hours left in office, Trump has now removed those limitations on his own aides.

Trump pardons former GOP fundraiser Elliott Broidy

President Trump has pardoned Elliott Broidy, a former top Republican fundraiser who pleaded guilty late last year to conspiring to violate foreign lobbying laws as part of a campaign to sway the administration on behalf of Chinese and Malaysian interests.

Why it matters: Broidy was a deputy finance chair for the Republican National Committee early in Trump’s presidency, and attempted to leverage his influence in the Trump administration on behalf of his clients. The president's decision to pardon Broidy represents one last favor for a prominent political ally.