Saudi Arabia attack triggers the biggest jump in oil prices in almost 30 years

Yemen’s Iran-aligned Houthi group

said it attacked two plants at the heart of Saudi Arabia ’s oil industry on Saturday, knocking out more than half the Kingdom’s output, in a move expected to send oil prices soaring and increase tensions in the Middle East .

The attacks will cut the kingdom’s output by 5.7 million barrels per day ( bpd ), according to a statement from state-run oil company Saudi Aramco , or more than 5% of global oil supply .

The pre-dawn strikes follow earlier cross-border attacks on Saudi oil installations and on oil tankers in Gulf waters, but these were the most brazen yet, temporarily crippling much of the nation’s production capacity. Saudi Arabia is the world’s biggest exporter , shipping more than 7 million barrels of oil to global destinations every day, and for years has served as the supplier of last resort to markets.

While the Houthis claimed responsibility for the attack, U.S. Secretary of State Mike Pompeo put the blame squarely on Iran, writing on Twitter that there was “no evidence the attacks came from Yemen.”

“Amid all the calls for de-escalation, Iran has now launched an unprecedented attack on the world’s energy supply ,” Pompeo said.

Saudi de facto ruler Crown Prince Mohammed bin Salman told U.S. President Donald Trump by telephone that Riyadh had the will and capability “to confront and deal with this terrorist aggression ,” according to Saudi state news agency SPA .

The United States condemned the attacks and Trump told the crown prince that Washington was ready to work with the kingdom to guarantee its security , according to the White House . The U.S. Department of Energy also said it was ready to release oil from its strategic petroleum reserve if necessary .

Energy Secretary Rick Perry

also said his department would work with the International Energy Agency , which coordinates energy policies of industrialized nations if global action is needed.

Saudi Arabia

, leading a Sunni Muslim coalition that intervened in Yemen in 2015 against the Houthis , has blamed regional rival Shi’ite Iran for previous attacks, which Tehran denies. Riyadh accuses Iran of arming the Houthis , a charge denied by the group and Tehran.

Coalition spokesman Colonel Turki al-Malki

said an investigation had been launched into who planned and executed the strikes. He said the Western-backed alliance would counter threats to global energy security and economic stability .

Ar amco Chief Executive Amin Nasser said there were no casualties from the attacks .

Abqaiq

is 60 km (37 miles) southwest of Aramco’s Dhahran headquarters . The oil processing plant handles crude from the world’s largest conventional oilfield , the supergiant Ghawar , and for export to terminals Ras Tanura —the world’s biggest offshore oil loading facility—and Juaymah . It also pumps westwards across the kingdom to Red Sea export terminals. Khurais , 190 km (118 miles) further southwest, contains the country’s second-largest oilfield .

Dangerous escalation after the U.S. withdrawal from the Iran nuclear deal

Regional tensions have escalated after Washington quit an international nuclear deal and extended sanctions on Iran .

Iran nuclear deal: Tehran to develop centrifuges for faster uranium enrichment

The attack heightened uncertainty in a market that had become relatively subdued in recent months and now faces the loss of crude from Saudi Arabia , traditionally the world’s supplier of last resort .

The attacks and subsequent hit to supply are likely to keep prices elevated for some time.

Major importers of Saudi crude, such as India , China , Japan , and South Korea , will be the most vulnerable to any supply disruption .

The initial surge in prices on Sunday was the biggest for Brent crude since the 1990-1991 Gulf crisis , before pulling back as various nations said they would tap emergency supplies to keep the world supplied with oil.

sg