Crude price edges up after attack on pipeline

Oil continued its rally yesterday, spurred by rising geopolitical tensions in the Middle East as the latest attack on Saudi Arabia’s infrastructure left the market jittery.

Brent was up 0.9 per cent, trading at $71.13 yesterday afternoon, ending three weeks of bearish sentiment in which the benchmark tanked after an earlier climb to $75 per barrel towards the end of April.

Saudi Aramco, which produces and sells oil on behalf of the kingdom, the world’s biggest exporter, yesterday temporarily shut a pipeline that came under attack.

“Saudi Aramco responded to a fire at East-West pipeline pump station 8, which was caused by a sabotage incident using armed drones that targeted pump stations 8 and 9,” the company said.

“As a precautionary measure, the company temporarily shut down the pipeline, and contained the fire, which caused minor damage to pump station 8.”

No injuries or deaths were reported, Saudi Aramco said, and oil and gas supplies were not affected. Yesterday, Saudi Energy Minister Khalid Al Falih said two pumping stations and a pipeline linking the oil-rich Eastern Province with the industrial city of Yanbu had been attacked by drones carrying explosives.

He called the attacks, which occurred between 6am and 6.30am local time, “an act of terrorism” on the global oil supply.

The incidents come only a day after four oil tankers off Fujairah came under sabotage attacks that resulted in the initial rally in oil prices.

Two tankers belonging to Saudi Aramco were damaged in the attacks.

One of the vessels had been on its way to the eastern Saudi port of Ras Tanura to be loaded with crude intended for the US.

Saudi-led Opec and allies of a global pact to curb output are to meet this Friday in the Red Sea city of Jeddah to review continuing supply cuts.

Analysts said the latest attacks on Middle East crude supply lines are likely to rattle an already sensitive market.

Tensions in the region rose after the US cancellation of waivers to Tehran’s main oil buyers at the end of April and the imposition of sanctions against Iran’s metals sector. The US has also made military manoeuvres in the region, sending an aircraft carrier, bombers and missiles as it seeks to put more pressure on the Islamic republic.

Tehran, which is now likely to have almost a million barrels of its crude taken off the markets, has threatened to close the Strait of Hormuz, a significant choke point for global crude, and lower its compliance with aspects of the 2015 nuclear deal.

Saudi Arabia’s stock market was choppy yesterday after an announcement by the government on armed drones attacking oil pumping stations wiped out early gains.

Saudi stocks nudged higher, then went into reverse and closed up just 0.1 per cent at 8,374 points.

“With rising tensions between Iran and the US, and with significant naval buildup in the region, markets are sensitive to news and can be tipped by the smallest signs of a conflict,” said Mihir Kapadia, chief executive of Sun Global Investments.

Al Alamiya and Al Baha Investment and Development tumbled 9.8 per cent and 8.8 per cent, respectively, while heavyweights Riyad Bank slipped 2 per cent and Saudi Telecom fell 2.2 per cent.

In Dubai, the index climbed 3.5 per cent per cent at 2,613 points, breaking a seven-day losing streak thanks partly to a 5 per cent gain in real estate company Emaar Properties and its units Emaar Malls and Emaar Development. MSCI maintained its decision to keep the two real estate companies in the standard index.

Aldar Properties, the largest developer in Abu Dhabi, added 2.4 per cent after it reported a rise in its first-quarter development sales.

Abu Dhabi’s index fell 2.6 per cent at 4,803 points, in its worst day in more than three years.

First Abu Dhabi Bank dropped 8.6 per cent after index provider MSCI decided against increasing FAB’s foreign inclusion factor.

“MSCI has surprisingly decided to maintain FAB’s weight in the index, despite the recent foreign ownership limit increase,” said Jaap Meijer, head of equity research at Arqaam Capital.

Despite FAB’s increase to its foreign ownership limit to 40 per cent from 25 per cent, MSCI has chosen to remain conservative as there has been no information on the sale of stakes held by the ruling family, he added.

Egypt’s blue-chip index was up 0.9 per cent to 14,024 points with Cairo for Investment and Real Estate Development added 3.6 per cent after CI Capital started coverage on the stock with an “overweight” rating, citing favorable industry dynamics.

Kuwait’s index dropped 1.3 per cent at 5,999 points, with 17 of 19 stocks in the index trading in negative territory.