Oil Prices Jump Following Drone Attack On Saudi Oil Facility

Daniel Fowler
September 19, 2019

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The Trump administration is standing by to deploy the nation's emergency oil reserves and help stabilize markets if needed after a series of drone attacks in Saudi Arabia knocked out half of the kingdom's crude output, or about 5 percent of world supplies.

Yemen's Houthi rebels had claimed responsibility for the attacks, which led to the interruption of an estimated 5.7 million barrels in oil supplies.

Though the world's overall energy demands in the past were smaller, the Saudi outage has sparked concern among analysts of prices pushing to $80 a barrel and beyond.

US Representative Adam Schiff, the Democratic chairman of the House intelligence committee, said he had not yet been briefed on whether the Saudi attack was directly attributable to Iran.

The remarks were created to damage Iran's reputation and provide a pretext for "future actions" against the Islamic republic, he said.

Baghdad, caught between its two main sponsors - Tehran and Washington - also denied any link to the attacks amid media speculation that the drones were launched from Iraq.

Deere confirmed that US President Donald Trump had spoken earlier on Saturday with Saudi Crown Prince Mohammed bin Salman. But experts said the Saudis did not want open conflict with Iran. The Middle Eastern kingdom is one of the leading producers of oil globally, producing about 10 percent of the world's daily supply.

14, 2019, satellite image from Planet Labs Inc. shows thick black smoke rising from Saudi Aramco's Abqaiq oil processing facility in Buqyaq, Saudi Arabia.

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The attack heightened uncertainty in a market that had become relatively subdued in recent months and now faces the loss of crude from Saudi Arabia, traditionally the world's supplier of last resort.

Fernando Ferreira, the director of geopolitical risk at the Washington-based Rapidan Energy Group, said rebuilding that infrastructure "will take many months".

Eurasia Group notes that Saudi Arabia's air defense systems are created to defend against traditional threats but are ill-equipped to tackle asymmetrical aerial threats like drones.

No casualties were reported but the full extent of the damage was not clear. "There are ample commercial stocks globally, and that's the key to making sure that this is as manageable as possible and that the impact is minimised". On Saturday, CEO Amin Nasser said that "work is underway" to restore production, but the incident could affect investor confidence ahead of Aramco´s stock market debut.

And newly appointed Energy Minister Prince Abdulaziz bin Salman said part of the drop would be offset by drawing on vast storage facilities created to be tapped in times of crisis.

Saudi Arabia is the world's largest oil exporter, latest figures from the Organization of the Petroleum Exporting Countries (OPEC) said it produces 9.8 million barrels a day.

Mousavi rejected as "nonsense" remarks by Republican U.S. Senator Lindsey Graham that it was time for the United States "to put on the table an attack on Iranian oil refineries" after the attacks on Saudi oil installations on Saturday that were claimed by Iran-aligned Houthis.

Jamal Abdi, president of the National Iranian American Council, warned that Pompeo's assessment of the attack on Saudi Arabia should not be trusted. U.S. officials suggested to reporters that the degree of scope, precision and sophistication of the strikes was beyond the ability of Houthi rebels, even as Iran has denied responsibility and made overtures to Britain and other European nations to forestall any USA action.

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