Search and Hit Enter

Saudi Arabia races to restore oil supply after strike blamed on Iran

Saudi Arabia raced on Sunday to restart operations at oil plants hit by drone attacks, which slashed its production by half, as Iran dismissed US claims it was behind the assault.

The drone attacks affected up to half of the supplies from the world’s largest exporter of oil, though the output should be restored within days, multiple news outlets reported, citing unidentified sources. It was unclear whether anyone was injured at the Abqaiq oil processing facility and the Khurais oil field.

Markets nervous

Instead, the kingdom focused on restoring production at the plants, as the Saudi bourse slumped three percent, as the week’s trading began on Sunday morning.

Saudi Arabia’s energy minister said the kingdom was temporarily halting production at two Aramco oil facilities that were attacked by the Yemeni rebels, interrupting about half of the company’s total output, the energy minister said Saturday.

The attacks “resulted in a temporary suspension of production at Abqaiq and Khurais plants,” Prince Abdulaziz bin Salman, the energy minister said in a statement carried by the official Saudi Press Agency.

Saturday’s explosions set off fires that engulfed the Abqaiq plant, the world’s largest oil processing facility, and nearby Khurais, which hosts a massive oil field.

Saudi’s energy infrastructure has been hit by the Houthis many times before, but this strike was of a different order, abruptly halting 5.7 million barrels per day (bpd) or about six percent of the world’s oil supply.

Aramco has said it will dip into its reserves to offset the disruption, but the incident could affect investor confidence as its stock market debut looms.

As markets closely watch Saudi’s ability to get its industry back on track, Aramco CEO Amin Nasser said Saturday that “work is underway” to restore full production.

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

Riyadh, the world’s top crude exporter, has built five giant underground storage facilities across the country that can hold tens of millions of barrels of various refined petroleum products.

Loggerheads

Following a phone call between US President Donald Trump and Prince Mohammed, the White House condemned the attacks on “infrastructure vital to the global economy.”

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.

United States Secretary of State Mike Pompeo pointed the finger squarely at Tehran, saying there was no evidence that the “unprecedented attack on the world’s energy supply” was launched from Yemen.

“The United States will work with our partners and allies to ensure that energy markets remain well supplied and Iran is held accountable for its aggression,” the top US diplomat added.

That drew an angry response from Tehran, where a foreign ministry spokesman said: “Such fruitless and blind accusations and remarks are incomprehensible and meaningless.”

UN investigators said the Houthis’ new UAV-X drone likely has a range of up to 1,500 kilometers (930 miles). That puts the far reaches of both Saudi Arabia and the United Arab Emirates in range.

While Saudi Arabia has taken steps to protect itself and its oil infrastructure, analysts had warned that Abqaiq remained vulnerable. The Rapidan Energy Group, a Washington-based advisory group, warned in May that “a successful attack could lead to a monthslong disruption of most Saudi production and nearly all spare production.” It called Abqaiq, close to the eastern Saudi city of Dammam, “the most important oil facility in the world.”