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A major Saudi Arabian oil field was attacked on Saturday, and it’s safe to say that no one saw this coming. Expect a big jump in oil prices when futures trading opens tonight.
U.S. shale producers have added millions of barrels to global crude supply in recent years, but that does not mean they can quickly replace barrels lost from weekend attacks on Saudi Aramco facilities, energy experts said on Sunday. Shale producers this year have been cutting budgets and workers and trimming production goals after years of heavy spending. Producers will see increased demand, especially from Asian buyers.
News of the attacks has experts and analysts warning that a long-term decrease in the world's crude oil supply has implications at the pump.
Prices could move higher still if Saudi output is curtailed for a more substantial period, the note's author Chris Midgley, global head of analytics at S&P Global Platts, wrote. An industry source briefed on the developments told Reuters on Sunday that Saudi Arabia's oil exports will continue as normal this week as the kingdom taps into stocks from its large storage facilities. Platts said, however, that "any evidence of prolonged disruption of production would heavily impact OPEC spare capacity and the ability of the IEA to use Strategic Petroleum Reserves to shore up the market".
Following drone strikes on Saudi Arabian oil facilities -- and fears of lowered production and increased crude price -- President Donald Trump said he would authorized the release of oil from the Strategic Petroleum Reserve and allow for the expedited "approval" of oil pipelines in Texas and various other states. The hits on two Saudi Aramco plants -- including on the largest petroleum processing facility in the world -- are expected to lower output dramatically of crude and gas for the oil-producing nation. "Based on the attack on Saudi Arabia, which may have an impact on oil prices, I have authorized the release of oil from the Strategic Petroleum Reserve, if needed, in a to-be-determined amount," wrote President Trump over Twitter Sunday evening, "sufficient to keep the markets well-supplied.
(Bloomberg) -- The latest and most destructive attacks on Saudi oil facilities provide stark evidence of the vulnerability of global crude supply in an age of disruptive technologies that can bring a century-old industry to its knees -- at least temporarily.From remote-controlled drones to anti-ship mines and computer worms, hostile parties have employed an unpredictable array of asymmetric weaponry to confound one of the best-equipped militaries in the Middle East. Saudi Arabia blames many of the attacks against its oil assets on Houthi rebels in impoverished Yemen, where Saudi forces have been fighting since 2015 in a civil war that’s spilling across their shared border.The use of drones shows that “an air force or even particularly advanced rockets are not necessary to cause widespread economic damage to the kingdom’s center of gravity,” said Milena Rodban, an independent risk consultant based in Washington, D.C. The Saudis accuse Iran of backing the Houthis and supplying them with weapons.The attacks mark at least the sixth time in four months that Saudi energy facilities or tankers carrying the kingdom’s oil have been targeted. Mine attacks against ships near the Strait of Hormuz and drone strikes on Saudi pipelines in May and June served as warnings of the vulnerability of supplies, even if they didn’t cause significant cuts in shipments. The weekend attack, by contrast, forced an immediate halt in 5.7 million barrels of daily production.Cyber attacks, another element of asymmetric warfare, pose a similar risk. Saudi Arabia blamed unidentified people based outside the country for sending a virus that compromised state-run oil producer Saudi Aramco’s computer network in August 2012. Although the virus had no effect on output of crude and refined products, the incident highlighted Aramco’s vulnerability to cyber strikes.The Houthis have previously targeted Saudi pipelines and refineries, in forays over the past year. In other strikes against Aramco facilities, guards repulsed a 2006 al-Qaeda attack on Abqaiq, and bombings at residential towers near Aramco’s headquarters in Dhahran on the country’s eastern coast caused deaths and damage.Yemen’s Houthis claimed responsibility for Saturday’s attack. The rebels said they launched drones, and the Saudi Press Association reported that drones were involved. Saudi Aramco said “projectiles” hit its facilities.Although U.S. Secretary of State Mike Pompeo directly blamed Iran for the attacks, Iran’s Foreign Ministry spokesman Abbas Mousavi denied the accusation.“Saudi Arabia’s oil infrastructure is an attractive target to more than just the Houthis,” Rodban said. “Anyone hoping to sway oil markets, spook investors, and highlight glaring weaknesses in defenses can take advantage of cheap and easy-to-deploy drones.”(Adds details of asymmetric threats in second paragraph.)\--With assistance from Manus Cranny and Alaa Shahine.To contact the reporters on this story: Anthony DiPaola in Dubai at email@example.com;Verity Ratcliffe in Dubai at firstname.lastname@example.orgTo contact the editors responsible for this story: Nayla Razzouk at email@example.com, Bruce Stanley, Andrew BlackmanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Saudi energy giant Aramco is battling to reassure markets after devastating attacks on two oil plants, where a prolonged shutdown risks roiling investor confidence ahead of the state-owned giant's mega stock listing, analysts say. A wave of drones struck Abqaiq –- the world's largest oil processing facility –- and the Khurais oil field in eastern Saudi Arabia, knocking out nearly half of the kingdom's crude production and exposing the vulnerability of its energy infrastructure. It is a major test for the kingdom's newly appointed energy minister Prince Abdulaziz bin Salman –- a half-brother to the crown prince –- as the attacks could dampen investor confidence in Aramco's upcoming two-stage stock market debut.
(Bloomberg Opinion) -- The chances of President Donald Trump easing sanctions on Iran’s oil exports have dropped to zero after an attack on Saudi Arabia’s oil industry that his Secretary of State Mike Pompeo has pinned on Tehran. The bigger challenge now will be reining in the U.S. hawks calling for retaliatory strikes on Iran’s energy industry facilities.Before this weekend the big political news dominating the oil market was the sudden departure of John Bolton as Trump’s hardline national security adviser. His leaving raised hopes (or fears, depending on your point of view) that waivers from sanctions might be reinstated for some buyers of Iranian crude; there was talk even of Trump meeting with Iran’s President Hassan Rouhani later this month.I’m deeply skeptical about whether such a diplomatic breakthrough would have taken place without Trump reopening Barack Obama’s nuclear deal with Iran, which the current president scrapped last year. I can’t believe Trump would have been willing to do that. The drone strike on Saudi Arabia’s Abqaiq oil processing facility in the early hours of Saturday morning makes such speculation irrelevant anyway.Pompeo appears to have taken on Bolton’s mantle of White House ultra-hawk. He blamed Iran for the attack in a Saturday tweet, even though responsibility has been claimed by the Houthi rebels being bombed savagely by a Saudi-led coalition in neighboring Yemen. They have plenty of incentive to retaliate.The secretary of state went further than linking Tehran to the attack through its training and support of the Houthis, who are part of a network of militant groups in the Middle East allied with Iran. “There is no evidence the attacks came from Yemen,” Pompeo said in his tweet. He’s yet to share any evidence that it came from Iran either.It would be better if he did. Memories of the “evidence” of Saddam Hussein’s non-existent weapons of mass destruction that precipitated the 2003 invasion of Iraq still linger. It’s a big step to say the attacks came from Iran. An earlier strike against Saudi Arabia’s East-West pipeline was deemed eventually to have been launched by Houthis operating from the sparsely-populated territory of south-western Iraq, although Iraq has denied that its territory was used for the new attack.Saudi Arabia started its devastating bombing campaign in Yemen in 2015 – with some U.S. backing and weaponry – after the Houthis took control of the capital and other parts of the country. Despite thousands of civilian deaths, terrible human rights abuses on both sides and a humanitarian catastrophe, the war has settled into an ugly stalemate. Saturday’s attack, along with previous drone strikes, shows the Houthis’ effectiveness in inflicting damage well beyond Yemen (if indeed it was them).Not surprisingly, Iran’s foreign ministry has denied responsibility. It now needs to go further and try to rein in its clients in Yemen. For its part, the U.S. should do the same in Saudi Arabia. Failure to do so will only lead to more attacks on the region’s oil infrastructure and more costly disruptions to supply.The Saudis will need weeks to restore full production capacity, according to my Bloomberg News colleagues Anthony DiPaola and Javier Blas. Other members of the OPEC+ group, who have been restricting output to boost oil prices since the start of 2017, will open their taps. But more than 85% of the OPEC production cut since January has come from Saudi Arabia itself. The available spare capacity is a lot less than it might appear at first sight.Riyadh was no doubt fearful that any rapprochement between Trump and Rouhani would have led to millions of barrels of Iranian oil gushing back onto the market, thereby scuppering the Saudi effort to support the crude price. The Abqaiq attack, and Pompeo’s response, shows there is no chance of that now. But the vulnerability of Aramco’s own installation to such strikes has created an infinitely worse problem.To contact the author of this story: Julian Lee at firstname.lastname@example.orgTo contact the editor responsible for this story: James Boxell at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Julian Lee is an oil strategist for Bloomberg. Previously he worked as a senior analyst at the Centre for Global Energy Studies.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
The oil market will rally by $5-10 per barrel when it opens on Monday and may spike to as high as $100 per barrel if Saudi Arabia fails to quickly resume oil supply lost after attacks over the weekend, traders and analysts said. Attacks on two plants at the heart of the kingdom's oil industry on Saturday knocked out more than half of Saudi crude output, or 5% of global supply. Crude prices would spike by at least $15-20 per barrel in a seven-day disruption scenario and go well into triple digits in a 30-day scenario.
President Donald Trump said Sunday the US is "locked and loaded" to respond to an attack on Saudi oil infrastructure that Washington has blamed on Iran, as Riyadh raced to restart operations at plants hit by drone attacks. It is the first time the president has hinted at a potential American military response to the attack, which slashed Saudi oil production by half and led both the kingdom and the United States to announce they may tap their strategic reserves. "Saudi Arabia oil supply was attacked.
Keep in mind that Saudi Arabia has yet to comment on the extent of damage on its oil production although Saudi Aramco President and CEO Amin Nasser said, “Work is underway to restore production and a progress update will be provided in around 48 hours.”
DUBAI/RIYADH (Reuters) - Saudi stocks fell sharply on Sunday, after attacks on two plants at the heart of the kingdom's oil industry a day earlier knocked out more than half of Saudi crude output. Sunday's decline extended a losing spree for Saudi stocks, which in recent weeks have been hit by expensive valuations, weak oil prices and concerns about the economic outlook. The drone attacks were carried out by Yemen's Houthi group, its military spokesman said on Al Masirah TV.
Iran rejected accusations by the United States that it was behind attacks on Saudi oil plants that risk disrupting world energy supplies and warned on Sunday that U.S. bases and aircraft carriers in the region were in range of its missiles. Yemen's Houthi group claimed responsibility for Saturday's attacks that knocked out more than half of Saudi oil output or more than 5% of global supply, but U.S. Secretary of State Mike Pompeo said the assault was the work of Iran, a Houthi ally.
Saudi Arabia has yet to comment on the extent of damage on its oil production but industry sources have said some 5-6 million barrels per day (bpd) or 5-6% of global supply have been affected.
The Trump administration said on Saturday it stood ready to tap U.S. emergency oil reserves if needed after attacks in Saudi Arabia shut more than half the crude output in the world's largest oil exporter. Yemen's Iran-aligned Houthis claimed responsibility for the attack that knocked out about 5 million barrels or 5% of global production, but U.S. Secretary of State Mike Pompeo put the blame squarely on Iran. The world's largest oil reserve currently holds nearly 645 million barrels of oil, according to the department website, consisting of 395 million barrels of heavy sour crude and 250 million barrels of light sweet oil.
An attack on Saudi oil facilities on Saturday is believed to have disrupted half the country's production capacity, making the United States the only real holder of the global supply cushion via its ability to raise own output or to soften sanctions against other major oil producers. Saudi Arabia has yet to comment on the extent of damage on its oil production but industry sources have said some 5-6 million barrels per day (bpd) or 5-6% of global supply have been affected. Saudi Arabia, the Organization of the Petroleum Exporting Countries' de-facto leader and largest producer, has been long seen as the custodian of the world's spare oil capacity.