WASHINGTON, Sept 16, 2019 (BSS/AFP) – Oil prices made their biggest jump
since the Gulf War on Monday after President Donald Trump warned that the US
was “locked and loaded” to respond to attacks on Saudi oil infrastructure
that Washington blamed on Iran.
It is the first time the president has hinted at a potential American
military response to the drone attacks, which slashed Saudi oil production by
half and led both the kingdom and the United States to announce they may tap
their strategic reserves.
“Saudi Arabia oil supply was attacked. 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 tweeted.
China on Monday urged the US and Iran to “exercise restraint… in the
absence of a conclusive investigation or verdict”.
The Tehran-backed Huthi rebels in Yemen, where a Saudi-led coalition is
bogged down in a five-year war, claimed Saturday’s strikes on two plants
owned by state energy giant Aramco.
But US Secretary of State Mike Pompeo pointed the finger squarely at
Tehran, saying there was no evidence the “unprecedented attack on the world’s
energy supply” was launched from Yemen.
“The United States will work with our partners and allies to ensure that
energy markets remain well supplied and Iran is held accountable for its
aggression,” the top US diplomat said.
That drew an angry response from Tehran, where foreign ministry spokesman
Abbas Mousavi said: “Such fruitless and blind accusations and remarks are
incomprehensible and meaningless.”
The White House said on Sunday that Trump may still meet Iran President
Hassan Rouhani at the UN meeting in New York next week, but Tehran said
Monday it did not think “such a thing would happen”.
Baghdad, caught between its two main allies — Tehran and Washington —
also denied any link to the attacks amid media speculation that the drones
were launched from Iraq.
Saudi de facto ruler Crown Prince Mohammed bin Salman has said the kingdom
is “willing and able” to respond to this “terrorist aggression.” But a tit-
for-tat strike on Iranian oil fields is “highly unlikely,” Middle East expert
James Dorsey told AFP.
“The Saudis do not want an open conflict with Iran. The Saudis would like
others to fight that war, and the others are reluctant,” said Dorsey, from
the S. Rajaratnam School of International Studies in Singapore.
– ‘Genie is out of the bottle’ –
The attacks sent oil prices sky-rocketing on Monday, with Brent futures up
$12 — or nearly 20 percent — in the first few minutes of business, while
WTI jumped more than $8, or 15 percent.
It was the biggest rise since the 1990-1991 Gulf War.
Saturday’s explosions set off fires that engulfed the Abqaiq plant, the
world’s largest oil processing facility, and nearby Khurais, which hosts a
massive oil field.
Saudi’s energy infrastructure has been hit by the Huthis many times
before, but this strike was of a different order, abruptly halting 5.7
million barrels per day (bpd) or about six percent of the world’s oil supply.
“The genie is out of the bottle,” said Bill Farren-Price, director of the
London-based RS Energy Group.
“It is now clear that Saudi and other Gulf oil facilities are vulnerable
to this kind of attack, which means that the geopolitical risk premium for
oil needs to rise.”
No casualties were reported but the full extent of the damage was not
clear.
Aramco also said it will dip into its reserves to offset the disruption.
On Saturday, CEO Amin Nasser said that “work is underway” to restore
production, but the incident could affect investor confidence ahead of
Aramco’s stock market debut.
The company would need weeks to reach full output again, Bloomberg News
reported Sunday, citing unnamed sources.
Trump tweeted that he had “authorized the release of oil from the
Strategic Petroleum Reserve, if needed, in a to-be-determined amount” that is
“sufficient to keep the markets well-supplied.”
Tehran and Washington have been at loggerheads since May last year, when
Trump pulled the US out of a landmark 2015 deal with world powers that
promised Iran relief from sanctions in return for curbs on its nuclear
program.
Saudi Arabia has spent billions on military hardware but recent events
have underscored the vulnerability of its infrastructure to attack.