Yemen’s Biggest Retaliation Shocks Invaders

Specter of Oil in Triple Digits

Date: 15 September 2019 - 22:18

News ID: ۷۰۵۰۶

U.S. blindly accuses Iran; Sen. Graham urges attack on Iran’s oil facilities
15 structures at world’s largest oil processing plant damaged
Analysts: Abqaiq attack worse than Iran closing Strait of Hormuz
LONDON (Dispatches) -- 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.
Industry sources have said it may take weeks to bring production fully online.
Bob McNally of Rapidan Energy told Reuters 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.
"This does not include what are likely to be large (if difficult to model or predict) premia to reflect zeroing out of global spare production capacity amidst ongoing disruption risks, hoarding, and panic sentiment.”
"The outage of 5 million bpd (barrels per day), roughly half of the current Saudi production level and about 5% of global supply, is very large by historic standards. It would in relatively few weeks start to put a stress on the market,” Samuel Ciszuk, founding partner at ELS Analysis, said.
"This incident is a very uncomfortable wake-up call to radically higher risk premiums on Persian Gulf production.”
Gary Ross of Black Gold Investors said the heart of the Saudi oil industry has been successfully attacked. "These attacks are difficult to stop and could occur periodically. The market has to price this risk in.”
Tilak Doshi of Muse & Stancil said, "In the oil universe, this attack is perhaps equivalent to the 9/11 attacks ... Abqaiq is easily the world’s single most important oil production and processing infrastructure site.”
"For Asian governments, perhaps this overtakes the perennial concern about the safety of tanker traffic in the Strait of Hormuz with even more serious concerns about the impact of a direct breakout of hostilities between the Saudi alliance and Iran.”
Yemen’s Houthi movement, fighting a Saudi-led invasion, claimed responsibility for "a large-scale operation involving 10 drones" on the Abqaid and Khurais oil facilities run by the Saudi state-owned oil company Aramco before dawn Saturday.
U.S. Secretary of State Michael Pompeo was quick to blame Iran for the brazen attacks, claiming there was no evidence the drones originated in Yemen.
The claim prompted a strong rebuttal from Iran and ridicule from many social media users who compared Pompeo’s rushed conclusion to Washington’s indecision about the murder of prominent journalist Jamal Khashoggi at the Saudi consulate in Istanbul in October 2018.
The top U.S. diplomat accused Iran of launching an "unprecedented attack on the world’s energy supply” without giving evidence, while Trump offered support for Saudi Arabia in a call on Saturday with Saudi Crown Prince Muhammad bin Salman.
At least one Republican lawmaker, Lindsey Graham, urged the U.S. to attack Iranian oil facilities.
Iranian Foreign Ministry spokesman Abbas Mousavi dismissed Pompeo’s allegations as "blind and fruitless remarks” that were "meaningless” in a diplomatic context.
Iranian Foreign Minister Muhammad Javad Zarif, writing on Twitter, mocked Pompeo, saying the United States had failed in its campaign of "maximum pressure” and was now "turning to ‘max deceit’.”
Zarif said Washington and its allies are "stuck in Yemen" and that blaming Tehran "won't end the disaster".
The conflict has been in military stalemate for years. Saudi Arabia and its allies have air supremacy but have come under scrutiny over civilian deaths and a humanitarian crisis that has left millions facing starvation. The Houthis, more adept at guerrilla warfare, and their allies in the Yemeni army have increased attacks on Saudi cities.
The attack represented Yemen’s most serious strike since Saudi Arabia invaded the impoverished nation four years ago. That Yemen could cause such extensive damage to such a crucial part of the global economy astonished some observers.
"So while everyone is wrestling w/securing the Strait of Hormuz the Houthis (!) w/10 drones (!!) successfully attacked the single most important facility in the global oil economy,” Kristin Smith Diwan, senior resident scholar at the Arab States Institute in Washington wrote on Twitter. "Unbelievable.”
According to U.S. government information, 15 structures at Abqaiq suffered damage on their west-northwest facing sides.
Any extended closure would most likely bring serious consequences to the world’s oil supply, the New York Times said.
Energy experts said that the attack on the Abqaiq facility represented their worst nightmare, and that it was perhaps worse than Iran blocking the Strait of Hormuz, a crucial path for the distribution of oil supplies.
"If there is a single crown jewel, this is it,” said McNally, a former White House energy adviser who is now the president of the Rapidan Energy Group, a market research firm.
The attacks not only shut down the processing plant, but also disrupted flows from the oil fields that feed into it. Further complicating matters, the plant was built with custom-made equipment that may be difficult to fix quickly if there is serious damage, because run-of-the-mill parts cannot be used to get the plant up and running, the New York Times said.
The attacks have raised the question of the potential effect on both oil prices and Aramco’s plans for an initial public offering of stock, it added.