Media Moves

Attacks on Saudi oil field spark fear for supply, prices shoot up

September 16, 2019

Posted by Irina Slav

Two attacks on the Saudi oil industry have sparked fears the world may swing into a shortage of oil.


CNN’s Rob McLean reported the price surge:

Oil prices are trading at their highest levels since May after Saturday’s attack on Saudi Arabian oil facilities disrupted the global supply of crude.

Futures retreated slightly after US President Donald Trump said he had authorized the use of oil from the country’s emergency reserve. In a series of tweets, Trump said that he had ordered that oil from the Strategic Petroleum Reserve, or SPR, be used “if needed.” He said he would use enough oil “to keep the markets well-supplied.”

Even so, US oil futures were trading at more than $61 a barrel during Asia hours — a spike of nearly 10%. Earlier, the price jumped as much as 15%. Futures of Brent crude, the global benchmark, traded at nearly $68 per barrel, an 11% increase.

Gasoline futures, meanwhile, were up about 9%.

“This is a big deal,” said Tom Kloza, chief oil analyst for the Oil Price Information Service. “It is the biggest shock to the oil markets since [Hurricane] Katrina. And like Katrina it will likely haunt us for months, at least weeks.”

Kloza said gasoline prices will likely “creep up” this fall, rather than drop steadily, as they historically have done.

CNBC’s Huileng Tan quoted an S&P Global Platts analyst as saying the disruption could last a while:

The attacks on critical oil production facilities in Saudi Arabia over the weekend will effectively wipe out the world’s spare oil capacity, an expert from S&P Global Platts said on Monday.

Drone strikes attacked a oil processing facility at Abqaiq and the nearby Khurais oil field on Saturday, knocking out 5.7 million barrels of daily crude production — or 50% of the kingdom’s oil output. That’s more than 5% of global daily oil production.

The country’s national oil company, Saudi Aramco, has 35-40 days of supply to meet contractual obligations, according to a source close to the matter.

Saudi Aramco reportedly aims to restore about a third of its output, or two million barrels, by Monday.

“This heightens the risk premium, it puts a lot of pressure on the supply side,” said Sarah Cottle, global head of market insight at S&P Global Platts.

“This incident effectively eliminates the world’s spare capacity,” Cottle told CNBC’s “Squawk Box” on Monday, though she added the longer-term outlook is bullish due to the immediate need to draw down on crude stockpiles.

Zeke Miller and Jon Gambrell from the AP reported the U.S. President was ready to strike back:

Tensions are flaring in the Persian Gulf after President Donald Trump said the U.S. is “locked and loaded” to respond to a weekend drone assault on Saudi Arabia’s energy infrastructure that his aides blamed on Iran.

The attack, which halved the kingdom’s oil production and sent crude prices spiking, led Trump to authorize the release of U.S. strategic reserves should they be necessary to stabilize markets.

Trump said the U.S. had reason to believe it knew who was behind the attack his secretary of state had blamed Iran the previous day and said his government was waiting to consult with the Saudis as to who they believe was behind the attack and “under what terms we would proceed!”

The tweets Sunday followed a National Security Council meeting at the White House and hours after U.S. officials offered what they said was proof that the attack was inconsistent with claims of responsibility by Yemen’s Iran-backed Houthi rebels and instead pointed the finger directly at Tehran.

A U.S. official said all options, including a military response, were on the table, but added that no decisions had been made. The official spoke on the condition of anonymity to discuss the internal deliberations.

Iran called the U.S. claims “maximum lies” and threatened American forces in the region. The attack dimmed hopes for potential nuclear talks between Trump and Iranian President Hassan Rouhani at the U.N. General Assembly this week.


Subscribe to TBN

Receive updates about new stories in the industry daily or weekly.

Subscribe to TBN

Receive updates about new stories in the industry.