Russia Warns Attack On Saudi Oil Plant Will Hit Fuel Prices

 saudi-oil-fire
World’s largest oil refinery ablaze after Houthi rebels drone strike (picture: Screen grab from Sky News video )

Following the drone attack by Yemeni rebels on a major Saudi Arabian oil processing plant, The Kremlin’s warned that the loss of production from the stricken plant will destabilise oil prices worldwide.  This follows statements by the European Union and the UK condemning the Houthi drone attacks on Saudi Arabia’s oil facilities carried out on Saturday (14 September, 2019).

While President Trump made belligerent noises, guaranteed to provoke the rebels Shia Muslim supporters in Iran , Russian President Vladimir Putin has simply asked to b kept up to date on developments in the wake of two drone attacks on the major Saudi energy facilities.  Russia believes such incidents will not contribute to the stabilisation of the global energy market, presidential spokesman Dmitry Peskov has said. It is safe to assume Russia’s leaders see the incident as an opportunity to benefit from higher crude oil prices.

“The drone attacks on Saudi Arabia’s oil infrastructure are an alarming event for the oil markets…Of course, such turbulence does not contribute to the stabilisation of the energy market,” Peskov said.

According to Peskov, the Saudi side has not appealed to Russia for assistance in the wake of the attacks, and probably has the necessary capacity to deal with the disruption on their own. “We don’t know whether they need help, but it’s unlikely. They have all the necessary capabilities themselves,” he said.

Peskov said the Kremlin “strongly condemned” Saturday’s incident, if it could be confirmed that the Saudi Aramco facilities were attacked by drones. (He would say that, wouldn’t he?)

EU, UK, France Condemn Attacks

Earlier on Sunday morning, the European Union’s foreign policy office issued a statement condemning the drone attacks, which, the statement read, posed a “real threat” of escalation of the Saudi – Yemeni conflict into full scale war between two regional powers, Saudi Arabia and Iran, and adding that “at a time when tensions in the region are running high, this attack undermines ongoing work at de-escalation and dialogue.” Brussels stands in solidarity with Saudi authorities and the Saudi people, the statement noted.

The UK Foreign Office also condemned the attack in diplomatic terms although certain people in The Treasury must have been rubbing their hands with glee as it becomes economically viable to reopen many North Sea rigs if Brent Crude goes above $80. China too would not be disappointed as Saudi Arabia is a long term ally of the USA, while the smaller oil producers most likely to benefit from the Saudi outage are more friendly to The People’s Republic in its bid to establish the petroyuan as a rival to the Petrodollar for cross border oil trades.

We have reported many times on the merciless bombing of the impoverished Shia Muslim state of Yemen. The conflict started when rebels tried to depose the Saudi – friendly regime and spawned a huge humanitarian crisis which was barely reported in mainstream media, as Saudi air strikes targeted roads, water supplies, sewage systems, hospitals and ports.

Predictably, news of the attack drove financial and commodity traders traders into a collective panic as global markets reopened after the weekend break, with with commodity traders desperately trying to calculate what the upper limit per barrel of oil prices would be (the previous record of $1.09 might hold when markets realise that while Saudi Arabia is still the world’s second biggest producer it is not as dominant as it once was, having been passed by the USA in 2018, and if the Kingdom and Iran decide to neutralise each other, Russia, Venezuela, Kazakhstan, the nations of the Caspian region, Nigeria , Mexico and a host od smaller oil producing nations will be happy to pump more once higher prices make production economically viable. When brent (the highest grade of crude,) reopened for trading in the aftermath of Saturday’s attack on the “world’s most important oil processing plant“, the price immediately exploded to around 20% higher than at close of business on Friday, to a high of $71.95 from the Friday $60.22 close, its biggest jump since 1988.

The hit to stability of supplies will exceed the loss of Iranian oil output in 1979 during the Islamic Revolution, according to data from the U.S. Department of Energy. It will also be worse than the loss of Iraqi and Kuwaiti production in 1990 when Saddam Hussein decided to annex Kuwait and add it to his empire and saw most of the oil infrastructure of both nations destroyed in the ensuing war.

News that the Saudi outage could last for months, rather that the weeks initially predicted suggest this could be just the start. Even if there are no more attacks on Saudi facilities or retaliation by the Saudis on Iran, the supply problem will not be be clear right away. The Saudis can still deliver from reserves for a few weeks but if the outage runs to months as industry sources are now predicting, we can expect crude prices to keep rising until there is relable evidence that output will be restored.

 

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