Oil & Energy

Google Ad

Houthi rebels from Yemen launched successful drone attacks on the world's biggest petroleum processing facility in Saudi Arabia Saturday. Reuters reports that up to 5 mbpd of production has been impacted, half of Saudi Arabia's output. Fires reportedly under control but damages unclear.

Saudi Attack

The Yemen Houthi rebels have launched similar attacks in the past however they have never been so successful. Saturday’s attack was the largest yet claimed by the Houthis in terms of its overall impact on the Saudi economy. The attack hit hundreds of miles away from their Yemen stronghold.

A Houthi spokesman has pledged to widen attacks and these are evidence they can strike more than 800km from the border. The coordinated drone strikes  forced the shut down of half  the Kingdom's crude production. The affect on oil prices will be watched at the open of markets from the production shutdown as it amounts to a loss of about five million barrels a day, around 5% of the world’s daily production of crude oil. Aramaco officials said they hoped to restore production to its regular level of 9.8 million barrels a day by Monday.

Aramco could also use this crisis to demonstrate its growing push for transparency and keep potential investors abreast of developments.

Saudi oil officials said they were rushing to contain the damage as fires raged in two major oil facilities. Saudi Aramco, the national oil company, held an emergency board meeting on Saturday to manage the unfolding crisis, the people familiar with the matter said.

Saudi officials are discussing drawing down their oil stocks to sell to foreign customers to ensure that world oil supplies aren’t disrupted, the people familiar with the matter said.

The attacks hit Hijra Khurais, one of Saudi Arabia’s largest oil fields, which produces about 1.5 million barrels a day. Abqaiq was also hit, the world’s biggest crude stabilization facility which processes seven million barrels of Saudi oil a day, about 8% of the world’s total. The damage at Abqaiq has knock-on effects throughout the kingdom’s oil fields because it is a collection point for much of its industry, turning crude oil into specific grades requested by customers.

saudi aramco refineries

The Ghawar field, the world’s largest, and Shaybah, which produces one million barrels a day, also reported disruptions because of Abqaiq’s problems, said the people familiar with the matter. There were no immediate reports of casualties.

The Houthis took control of Yemen’s capital, San’a, in 2014 during a civil war. Since then, a Saudi-led coalition has fought a war to unseat the Houthis and reinstate a government supported by Saudi Arabia, the United Arab Emirates and other regional powers. In recent months the Houthis, along with Iranian-backed armed groups in Iraq, have intensified a campaign of missile and drone attacks on Saudi Arabia, launching more than a dozen attacks at Saudi airports, a desalination plant and oil infrastructure.

Tensions have been rising in the gulf with Iran and its proxies like the Houthis on one side and the U.S. and partners like Saudi Arabia.There is the oil price aspect but perhaps of more concern is the affect on investor confidence for the Aramaco initial public.The speed that the oil company can get production up is critical as is future protective measures.

President Trump called Saudi Arabia’s Crown Prince Mohammed bin Salman, on Saturday and said the U.S. was ready to “cooperate with the kingdom in supporting its security and stability,” according to the Saudi Press Agency. Prince Mohammed told Mr. Trump that Saudi Arabia “is willing and able to confront and deal with this terrorist aggression,” according to the agency.

These attacks come just a few days before for the United Nations General Assembly meeting in New York, where President Trump had said he is interested in meeting Iranian President Hassan Rouhani to defuse tensions. Iran has not reacted to the attacks as of Saturday.  Mr. Rouhani has said won’t meet with Mr. Trump until the U.S. lifts sanctions imposed after the president pulled out of the 2015 international nuclear deal

Analysts caution against accepting the Houthi claim of responsibility at face value. Back in May an attack on a Saudi oil-pumping station saw Saudi officials initially blame the Houthis and Iran, It later turned out to have been launched by an Iranian-backed militia in Iraq, according to U.S. officials. Saudi officials aren’t sure the attack emanated from Yemen and were discussing on Saturday the possibility that the attack came from the north, according to people familiar with the matter Reuters reported.

Suspected Houthi ordnance originating from the Yemeni border is launched at Saudi Arabia several times a week, a U.S. official said. The strikes have put pressure on Saudi Arabia’s air defenses, as the Saudi government says it has shot down multiple drones and missiles. The increasing sophistication of the drone and missile attacks this year have shown deepening cooperation between the Houthis and Iran as Tehran has sought ways to apply pressure on their Saudi and American adversaries, according to U.S. officials and analysts.

The Iranian government denies controlling the Houthi movement. A U.N. panel last year said there were “strong indications” that Iran was the source of Houthi missile and drone technology but didn’t directly accuse the Tehran government of providing the weaponry itself. It said Iran has failed to take the necessary measures to prevent such transfers.

A Saudi airstrike killed more than 100 people at a detention center on Sept. 1. “We promise the Saudi regime that our future operations will expand and be more painful as long as its aggression and siege continue,” a Houthi spokesman said Saturday.

The strikes complicate U.N. and U.S. efforts to negotiate an end to the conflict, which has killed more than 10,000 people over the last four years. U.S. officials had quietly attempted to launch a back channel to the Houthis. The Yemen war is a central front in a new and more aggressive foreign policy overseen by Prince Mohammed, who launched the intervention with a coalition of allied states in 2015.

Source: Reuters

From The TradersCommunity News Desk

Log in to comment
Discuss this article in the forums (15 replies).