Oil prices jump as attack on Saudi plant threatens supply

Daniel Fowler
September 16, 2019

Over the weekend, USA secretary of state Mike Pompeo accused Iran of "an unprecedented attack on the world's energy supply" and U.S. president Donald Trump tweeted that the USA was "locked and loaded" if Saudi Arabia requires.

Trump also said the United States was "locked and loaded" for a potential response to the attack on Saudi Arabia's oil facilities.

A prominent U.S. senator suggested striking Iranian oil refineries in response to the assault, claimed by Yemen's Iran-backed Houthi rebels, on Saudi Arabia's largest oil processing facility.

Trump talked about Sunday the United States used to be "locked and loaded" to reply to the assault, whereas Secretary of Say Mike Pompeo talked about: "The usa will work with our companions and allies to have faith sure that energy markets live correctly equipped and Iran is held accountable for its aggression".

He added the attacks are forcing oil markets to rethink assumptions that oil supplies are abundant and safe, and "to price the risk that all Saudi, and actually all Middle Eastern oil facilities can be hit by third parties with these types of drones".

The fall-out: If it was them, the fact that the Houthis now have the ability to carry out such attacks is changing the face of the Yemen war, which started in 2014. The other signatories should also reimpose economic sanctions on the regime, and be prepared to join a US -led naval force protecting the Persian Gulf.

Washington has also released new evidence to back up its allegation that Iran was responsible for the assault amid heightened tensions over Tehran's collapsing nuclear deal. It was last at $60.89 a barrel while Brent crude was up 13% at $68.06 after earlier rising to $71.95. It ships more than 7 million barrels daily to global destinations.

"Iran has now launched an unprecedented attack on the world's energy supply", Pompeo said.

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Aramco also said it will dip into its reserves to offset the disruption.

Smoke billows after a fire at an Aramco factory in Abqaiq, Saudi Arabia, on Saturday.

Gas prices are set to rise after devastating drone strikes on two oil refineries in Saudi Arabia caused shockwaves in the global market.

US Energy Secretary Rick Perry "stands ready" to tap the country's Strategic Petroleum Reserve to steady oil markets if necessary, a department spokesperson said in a statement.

Following a phone call between Trump and Prince Mohammed, the White House condemned the attacks on "infrastructure vital to the global economy".

Brent futures, the worldwide benchmark, jumped by almost 20% to US$71.95 a barrel, while West Texas Intermediate increased by 15% to $63.34 before falling back in trading.

US officials also offered highly detailed satellite photos of the Saudi sites that show damage suggesting the attack came from the north, where Iran or Iraq are, rather than from Yemen to the south. Iraq's prime minister has denied the attack came from his country, where Iranian-backed Shiite rebels operate.

Iran rejected US accusations that it was behind the attack and warned that USA land and naval forces in the region were within range of its missiles.

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