Oil surges as drone attack on Saudi Aramco plant jams supplies
16 September 2019
Crude oil prices surged to six-month highs in early morning trade in Asian markets after drone attacks on Saudi Arabia's biggest crude facilities forced oil giant Aramco to shut half of its plat and cut more than 5 per cent of global oil supply.
US crude futures were trading 11 per cent higher at $61.10 a barrel, falling from earlier highs, on expectations that other global oil producers would lift output to ramp up supplies. North Sea Brent crude futures were up 13 per cent at $68.06 after soaring to $71.95 a barrel.
Saturday’s attacks by Iran-backed Houthi rebels in Yemen have reportedly affected 5 million barrels per day of oil production from Abqaiq, causing further stress to an already volatile oil market.
An oilfield operated by Saudi Aramco was attacked by a number of drones early on Saturday, which sparked a huge fire at a processor.
In an official statement, Aramco said “Saudi Aramco emergency crews contained fires at its plants in Abqaiq and Khurais, as a result of terrorist attacks with projectiles. These attacks resulted in production suspension of 5.7 million barrels of crude oil per day.”
“We are gratified that there were no injuries. I would like to thank all teams that responded timely to the incidents and brought the situation under control. Work is under way to restore production and a progress update will be provided in around 48 hours,” Amin H Nasser, Saudi Aramco president and CEO, said after visiting the plant site.
Saudi Arabia is one of the main suppliers of crude oil for Indian refiners and any development affecting crude supplies could have an immediate impact on prices, which would in turn hurt India’s slowing economy.
Saudi Aramco is one of the main suppliers to Mukesh Ambani’s Reliance Industries, India’s biggest private refining-cum-petrochemical player, and a key supplier to public sector oil refiners such as Indian Oil Corporation.
While supply disruptions are regular, shutting down of a crude processing facility would create more uncertainties in the market and drive up prices.
The attacks also heightened investor worries about the geopolitical situation in the region and worsening relations between Iran and the US.