Oil prices jump after Saudi Arabia reports drone attack on pumping stations

Oil prices jump after Saudi Arabia reports drone attack on pumping stations

Oil prices rose sharply on Tuesday morning on reports of a drone attack at oil pumping stations in Saudi Arabia.

The incident is an “act of terrorism,”, and the apparent drone attack comes just a day after Saudi Arabia said two of its oil tankers were sabotaged off the coast of the United Arab Emirates.

Brent crude futures were up 1.3% at $71.14 a barrel, up 90 cents. U.S. West Texas Intermediate (WTI) crude futures were at $61.67 per barrel at 12:40 p.m. London time, up 1.03% for the session.

The fire has since been contained, according to the SPA. Al-Falih asserted that oil production was not interrupted. State oil company Saudi Aramco said that its oil and gas supplies to Europe have not been affected, and that no one was injured.

“This act of terrorism and sabotage in addition to recent acts in the Arabian Gulf do not only target the Kingdom but also the security of world oil supplies and the global economy,”

the SPA described al-Falih as saying.

No accusations are being made yet

No one has yet been directly accused of carrying out the attack, but a Yemeni Houthi-run TV channel announced on Tuesday morning it had launched drone attacks on several Saudi installations.

The channel Masirah TV,  citing a Houthi military official, reported that “seven drones carried out attacks on vital Saudi installations.”

Al-Falih, according to the SPA statement, said: “These attacks prove again that it is important for us to face terrorist entities, including the Houthi militias in Yemen that are backed by Iran.”

Yemen’s Houthi rebels, who are backed by Iran, have been fighting Saudi Arabia in their country since the kingdom launched an offensive against it in early 2015 in defense of its internationally-recognized government, which the Houthis overthrew in late 2014. The more than four-year long conflict has been deemed by the UN as the world’s worst humanitarian crisis.

“Sabotage attacks”and tensions with Iran

Saudi Arabia’s main stock index, the Tadawul, was down 1.5% at midday London time.

The exchange, which joined the MSCI emerging markets index this year as part of the country’s economic diversification agenda, dropped 2.7% on Monday on government reports that two Saudi oil tankers were among four vessels targeted in an unspecified “sabotage attack” off the United Arab Emirates coast of Fujeirah.

While no one has been accused of the vessel attack, unnamed U.S. officials have suggested it could be Iran or one of its proxies, the Houthi rebels battling the Saudis in nearby Yemen. The Houthis have launched numerous drone and missile attacks against Saudi Arabia and claim to have carried out drone attacks against the UAE.

Iran has denied any involvement or knowledge of the attacks, and called for an independent investigation. Iran’s Foreign Minister Javad Zarif on Tuesday criticized “suspicious developments” in the region he said were aimed at creating tension.

Fears spike over potential for accidental conflict

The series of incidents have ramped up tensions in the oil-rich region, where the reported sabotage attack on the commercial vessels that took place Sunday has spiked fears of possible conflict with regional rival Iran. The escalation could threaten the Strait of Hormuz, a critical choke point for some 30% of the world’s seaborne oil.

The news follows a week of increasingly provocative language exchanged between Washington and Tehran.

Citing “very real” threats coming from Iran, but withholding specific details, Secretary of State Mike Pompeo emphasized during an interview with CNBC on Sunday that all options — military and otherwise — were on the table in case Iran “makes a bad decision.”

Tehran announced last week that it would return to higher levels of uranium enrichment, breaching the 2015 nuclear deal, if Europe did not protect it from the crippling impact of U.S. sanctions.

This followed the White House pushing news of a U.S. strike group carrier in the Gulf to send an “unmistakable” message to Iran. Although the ship was on a routine deployment, the administration’s announcement signaled a surge in confrontational rhetoric.

Source: cnbc.com