Energy prices spike following attack on Saudi oil facilities

US blames Iran or Iraq as destruction to Abqaiq site leads to global disruption

Global energy prices spiked yesterday after a weekend attack on key oil facilities in Saudi Arabia caused the worst disruption to world supplies on record.

President Donald Trump warned that the US was “locked and loaded” to respond as US officials offered satellite images of the damage at the heart of the kingdom’s crucial Abqaiq oil processing plant and a key oil field, alleging the pattern of destruction suggested the attack came from either Iraq or Iran – rather than Yemen, as claimed by Iranian-backed Houthi rebels there.

Iran for its part called the US allegations “maximum lies”.

However, initial investigations show Iranian weapons were used in the attack, Saudi military spokesman Colonel Turki al-Malki told reporters in Riyadh yesterday.

The Houthis yesterday warned of more attacks on Saudi oil facilities and urged foreign companies doing business in the kingdom to stay away from its energy sites.

In Vienna, US secretary of energy Rick Perry condemned what he called “Iran’s attack on the kingdom of Saudi Arabia” in an address to the International Atomic Energy Agency’s general conference.

“This behaviour is unacceptable and they must be held responsible,” Mr Perry said of Iran.

“Make no mistake about it, this was a deliberate attack on the global economy and the global energy market.”

He added that “despite Iran’s malign efforts, we are very confident that the market is resilient and will respond” and said that Mr Trump has authorised the release of strategic oil reserves should the US need them.

But actions on any side could break into the open a twilight war that has been raging just below the surface of the wider Persian Gulf in recent months.

Already, there have been mysterious attacks on oil tankers that America blames on Tehran, at least one suspected Israeli strike on Shiite forces in Iraq, and Iran has shot down a US military surveillance drone.

Benchmark Brent crude gained nearly 20% in the first moments of trading yesterday before settling down to more than 8% higher as trading continued.

Saturday’s attack halted production of 5.7 million barrels of crude a day, more than half of Saudi Arabia’s global daily exports and more than 5% of the world’s daily crude oil production. Most of that output goes to Asia.

The Saudi disruption would be the greatest on record for world markets, according to figures from the Parisbased International Energy Agency.

It just edges out the 5.6 millionbarrels-a-day disruption around the time of Iran’s 1979 Islamic Revolution, according to the IEA.

Saudi Arabia has pledged that its stockpiles would keep global markets supplied as it rushes to repair damage at the Abqaiq facility and its Khurais oil field.

Iraq’s prime minister Adel AbdelMahdi has denied the attack came from his country, where Iranian-backed Shiite rebels operate.

Not for the first time in recent years, the world seems to be staring over a precipice due to events in the Middle East. The weekend attacks on Saudi Arabian oil facilities have proved disruptive already. The markets were thrown into turmoil and the full effects are yet to be felt.

Donald Trump does not want war with Iran, despite sabre-rattling since he came into office but few things are more likely to rouse the anger of the US than threats to their oil supplies.

The removal from the White House of hawkish John Bolton as national security adviser seemed designed to decrease tensions, coming, reportedly, after he clashed with the president over lifting Iranian sanctions.

However, the events of another tumultuous weekend may have scotched such ambitions.

Mr Trump’s immediate response, predictably, was to come out firing.

His “locked and loaded” phraseology was typically bullish but has been used before – how often can he make empty threats before he is forced to follow through on them? Iran, of course, denies involvement in the Saudi attacks. The Brexit-obsessed UK Government will await the full facts before committing but would be well-warned not to take its eye off the ball.

The last thing the country needs is to be drawn into further conflict.

Picture: AP. A satellite image released by the US government showing the damage to the Abqaiq oil plant.