Bad news for the world economy, good news for American oil producers:
Saudi Arabia’s oil production has been severely disrupted by drone attacks on two major oil facilities run by state-owned company Aramco, reports say.
Sources quoted by Reuters and WSJ said the strikes had reduced production by five million barrels a day – nearly half the kingdom’s output.
The fires are now under control at both facilities, Saudi state media say.
A spokesman for the Iran-aligned Houthi group in Yemen said it had deployed 10 drones in the attacks.
The spokesman, Yahya Sarea, told al-Masirah TV, which is owned by the Houthi movement and is based in Beirut, that further attacks could be expected in the future.
Snip.
Aramco is not only the world’s biggest oil producer, it is also one of the world’s most profitable businesses.
The Khurais oilfield produces about 1% of the world’s oil, and Abqaiq is the company’s largest facility – with the capacity to process 7% of the global supply. Even a brief or partial disruption could affect the company, and the oil supply, given their size.
There was a sharp intake of breath as analysts I spoke to today digested the information that reports suggest that half of Saudi Arabia’s oil production could have been knocked offline by these attacks.
The country produces 10% of the world’s crude oil. Cutting this in half could have a significant effect on the oil price come Monday when markets open.
However, Aramco has yet to confirm the scale of the damage.
The success of the drone strike shows the vulnerability of its infrastructure, at a time when it is trying to show itself in its best light while gearing up to float on the stock market.
And it raises concerns that escalating tensions in the region could pose a broader risk to oil, potentially threatening the fifth of the world’s supply that goes through the critical Strait of Hormuz.
It’s burning pretty well:
My tabula rasa expectation is that, absent gross Saudi mismanagement, all those facilities will be back online in a few weeks. The global oil industry is extremely robust at recovering from disasters, either natural or man-made.
The situation in Yemen will remain intractable as long as the Iranians continue to fund the Houthis and Saudi Arabia is unwilling (or unable) to expend the resources to crush them completely. The quickest past to peace in Yemen is continuing the pressure of sanctions until the Islamic Republic regime gives up their meddling or collapses.
