The recent bad news from the region is a major drone attack on two facilities of Aramco, the Kingdom of Saudi Arabia largest oil company. The attack started awful fires at Abqaiq, the company’s largest oil processing unit. The company reported no causalities and the Kingdom’s official news agency stated that the fires have been extinguished, which is a positive sign. Although the facility has a capacity to process seven percent of the world’s oil, the little concerning reason is that the attack happened at a time when the worldwide market is currently lethargic with declining demand.
Drone attacks have set alight two major oil facilities run by the state-owned company Aramco in Saudi Arabia. Footage revealed a great blaze at Abqaiq, site of Aramco’s largest oil processing plant, while a second drone attack started fires in the Khurais oilfield. The fires are now under control at both facilities. . Saudi Arabia is stated to be shutting down around half of its oil output, the Wall Street Journal reported. The two fires have been controlled. There have been no details on the damage but Agence France-Presse mentioning interior ministry spokesman Mansour al-Turki as saying there were no casualties. Abqaiq is about 37 miles south-west of Dhahran in Saudi Arabia’s Eastern Province, while Khurais, some 200 kilometer further south-west, has the country’s second largest oilfield. Saudi security forces thwarted an attempt by al-Qaeda to attack the Abqaiq facility with suicide bombers in 2006.The Saudi Air Force has been hitting targets in Yemen for years. Presently the Houthis have great ability, if much more limited, ability to strike back. It shows that the age of armed drone operations being limited to a small number of major nations is now finished.
Aramco graded as the world’s largest oil business and these facilities are important. The Khurais oilfield produces about 1percent of the world’s oil and Abqaiq is the company’s largest facility with the capacity to 7 percent of the world supply. Even a short or incomplete destruction could affect the company, and the oil supply, given their size. Markets now have the weekend to abridge information from Aramco and assess the long-term consequences. Richard Mallinson, geopolitical analyst at Energy Aspects says any reaction on Monday morning is likely to be subdued , as markets are less worried about supply than demand at the moment, owing to less worldwide economic growth and the constant trade war between the US and China. There are worries that increasing stress in the region could represent risk, possibly menacing the fifth of the world’s oil supply that goes through the crucial Strait of Hormuz. Yemen has been at war since 2015, when President Abdrabbuh Mansour Hadi was forced to escape the capital Sanaa by the Houthis. Saudi Arabia backs President Hadi, and has led a coalition of regional countries against the rebels. Strain in the essential shipping lanes deteriorated when Iran shot down a US surveillance drone over the Strait of Hormuz in June, leading a month later to the Pentagon announcing the deployment of US troops to Saudi Arabia. Oil prices increased by nearly 20 percent after two attacks on Saudi Arabian facilities on Saturday suppressed more than 5 percent of the world’s supply. Brent crude, the international benchmark used by oil traders, climbed to $71.95 a barrel at one point.US oil prices also peaked, but both curtailed gains as President Donald Trump ordered the release of US reserves. The strike, which the US blames on Iran, has increased fears of increased risk to energy supplies in the region. The price of Brent crude is currently up about 9 percent at $65.76 a barrel, while West Texas Intermediate is 8.5 percent higher at $59.54 after rising as much as 15 percent earlier. Prices remain below Brent’s 12-month high of $86.29 a barrel seen last October, when West Texas Intermediate also jumped to more than $76 a barrel. The drone attacks on plants in the heartland of Saudi Arabia’s oil industry hit the world’s largest petroleum-processing facility as well as a nearby oil field, both of which are operated by energy giant Aramco. Jointly they account for about 50 percent of Saudi Arabia’s oil output, or 5 percent of daily global oil production. It could take weeks before the facilities are completely back on line.
The Saudis have provided fewer detail about the attacks, in addition from saying there were no casualties, but have given a few more sign about oil production. Energy Minister Prince Abdulaziz bin Salman said some of the fall in production would be made up by exploiting huge storage facilities. The kingdom is the world’s biggest oil exporter, shipping more than seven million barrels daily. Saudi stocks stood at 188 million barrels in June, as reported by official data. The damage to facilities at Abqaiq and Khurais appears to be massive, and it may be weeks before oil supplies are controlled. Jeffery Halley, senior market analyst at Oanda, said the destruction would not influence crude supplies in the closer-term. There is sufficient capacity in storage to meet the shortfall in the short-term. The market has adjusted without thinking over the last two years to the loss for political reasons of over two million barrels a day of production from Venezuela and Iran. In the UK, 40 percent of the price of a litre of petrol is made up of oil, fuel production and profit. The remaining is tax. Oil ended nearly 15 percent higher on Monday, with Brent cutting its biggest climb in over 30 years amid register trading volumes, after an attack on Saudi Arabian crude facilities lessened the Saudi Kingdom production in half and spread apprehension of revenge in the Middle East. The attack heightened uncertainty in markets that had become comparatively restrained in recent months and now counter the loss of crude from Saudi Arabia.