Biggest oil price hike since 1991 after Saudi attacks
September 16, 2019 - Oil prices surged nearly 20 percent at one point on Monday, with Brent crude posting its biggest intraday gain since the Persian Gulf War in 1991, after an attack on Saudi Arabian oil facilities at the weekend halved the kingdom’s production.
Prices came off their peaks after US President Donald Trump authorized the use of his country’s emergency stockpile to ensure stable supply, Reuters reported.
Brent crude futures, the international benchmark, rose as much as 19.5 percent to $71.95 per barrel, the biggest intraday jump since Jan. 14, 1991. By 1100 GMT, the contract was at $65.38, up $5.16, or 8.6 percent.
US West Texas Intermediate (WTI) futures climbed as much as 15.5 percent to $63.34, the biggest intraday percentage gain since June 22, 1998. The contract was later at $59.36, up $4.51 or 8.22 percent.
Saudi Arabia is the world’s biggest oil exporter.
The attack on state-owned producer Saudi Aramco’s crude-processing facilities at Abqaiq and Khurais cut output by 5.7 million barrels per day. The company has not given a timeline for the resumption of full output.
Consultancy Rapidan Energy Group said images of the Abqaiq facility after the attack showed about five of its stabilization towers appeared to have been destroyed, and would take months to rebuild – something that could curtail output for a prolonged period.
Two sources briefed on Aramco’s operations said a full return to normal production volumes “may take months”.
“If these outages are lengthy, Saudi Aramco will struggle to hit export specification for its Arab Light and Arab Extra Light streams, and may even be forced to declare force majeure on some of these exports,” consultancy Energy Aspects said in a note.
“We expect the IEA and US DOE to also release strategic stocks to fill the gap if the Saudi outage is prolonged,” it said, referring to the International Energy Agency and the US Department of Energy.
Major importers of Saudi crude, such as India, China, Japan and South Korea, will be the most vulnerable to the supply disruption.
South Korea has already said it would consider releasing oil from its strategic reserves.
US gasoline futures rose as much as 12.9 percent, while US heating oil futures gained 10.8 percent. China’s Shanghai crude futures rose to their trading limit, gaining 8 percent at the open.
Russia’s Energy Minister Alexander Novak told reporters on Monday that there is enough oil in global stockpiles to replace barrels Saudi Arabia has temporary lost.
“Currently, we understand that the world has enough commercial stockpiles to cover the shortage... in the mid-term,” Novak said.
He said that Russia was sticking to its commitments under the global oil production deal and it was premature to talk about any possible changes to production levels.
Saudi Arabia, the United States and China have hundreds of millions of barrels of oil in strategic storage.
US ‘locked and loaded’
Trump said he had approved the release of oil from the US Strategic Petroleum Reserve if needed. He also said the United States was “locked and loaded” for a potential response to the attack.
“There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!” Trump said on Twitter.
US Secretary of State Mike Pompeo said there was no evidence the attack came from Yemen.
“Amid all the calls for de-escalation, Iran has now launched an unprecedented attack on the world’s energy supply,” Pompeo said.
On Sunday, a senior US official said evidence from the attack indicated Iran was behind it, instead of the Yemeni Houthi group.
“There’s no doubt that Iran is responsible for this. No matter how you slice it, there’s no escaping it. There’s no other candidate,” the official told reporters.
Riyadh has accused Iran of being behind previous attacks on oil-pumping stations and the Shaybah oil field, charges that Tehran denies, but has not blamed anyone for Saturday’s strike. Riyadh also says Tehran arms the Houthis, a charge both deny.
Some Iraqi media outlets said the attack came from Iraq. Baghdad denied that and vowed to punish anyone using Iraq.
Iraq said on Monday that Pompeo told Iraqi Prime Minister Adel Abdul Mahdi that the United States has information confirming Baghdad’s denial that Iraqi territory was used to launch an attack on Saudi oil facilities.
“On his part, the US secretary of state said the information they have confirms the Iraqi government’s statement that its territory was not used to carry out this attack,” Abdul Mahdi’s office said in a readout of a phone call between the two.
‘Unacceptable’ accusations
Iran said again on Monday accusations that it had a role in the attack on Saudi oil installations were “unacceptable” and “baseless”.
“These allegations are condemned as unacceptable and entirely baseless,” Foreign Ministry spokesman Seyyed Abbas Mousavi said.
Aramco still target
Yemen’s Houthi movement said on Monday that Aramco’s oil processing plants were still a target and could be attacked at “any moment,” warning foreigners to leave the area.
The attacks on Aramco plants in Abqaiq and Khurais in the kingdom’s eastern region were carried out by drones with normal and jet engines, Houthi military spokesman Yahya Sarea said in a tweet.
Sarea said Saudi Arabia should stop its “aggression and blockade on Yemen”.
No to blame game
UN Secretary General Antonio Guterres condemned Saturday’s attacks and called on all parties to exercise restraint and prevent any escalation.
The European Union warned the strikes posed a real threat to regional security.
The European Commission said on Monday it was important to determine the facts behind the attack before establishing who was responsible.
“It is important to clearly establish the facts and then determine responsibility for this deplorable attack,” a spokeswoman said, largely repeating a statement issued by the EU on Sunday.
Britain on Monday said the attack was serious and outrageous but that the full facts were needed on who was responsible before making a response.
The attack “was a wanton violation of international law,” British Foreign Secretary Dominic Raab said, adding that the United Kingdom stood firmly behind Saudi Arabia.
“In terms of who is responsible, the picture is not entirely clear,” Raab said. “I want to have a very clear picture which we will be having shortly. It’s a very serious, an outrageous act, and we need to have a clear and as united as possible international response to it.”
Russia on Monday urged countries in the Middle East and outside the region not to draw “hasty conclusions” on who staged the attack.
Kremlin spokesman Dmitry Peskov said: “We have a negative attitude toward rising tensions in the region and call for all countries in the region and outside of it to avoid any hasty steps or conclusions which may deepen destabilization.”
In a separate statement on Monday, Russia’s Foreign Ministry said it believed that the exchange of strikes on civilian targets was “a direct consequence of the ongoing sharp military and political crisis in Yemen”.
“We believe it is counterproductive to use what happened to increase tensions around Iran in line with the well-known US policy,” the Foreign Ministry said.
“Proposals on tough retaliatory actions, which appear to have been discussed in Washington are even more unacceptable.”
China’s Foreign Ministry said on Monday it was irresponsible to blame anyone for the attack without conclusive facts, striking a cautious note after the United States blamed Iran.
Speaking in Beijing, Chinese Foreign Ministry spokeswoman Hua Chunying appealed for calm and restraint.
“Pondering who is to blame in the absence of a conclusive investigation, I think, is in itself not very responsible. China’s position is that we oppose any moves that expand or intensify conflict,” Hua told a daily news briefing.
“We call on relevant parties to avoid taking actions that bring about an escalation in regional tensions. We hope all sides can restrain themselves and can jointly safeguard the peace and stability of the Middle East.”