Saudi Arabia said some of the world’s most protected oil infrastructure came under missile and drone attack in an escalation of regional hostilities that sent crude prices surging. The attacks on Sunday were intercepted, Saudi Arabia said, and oil output appeared to be unaffected. But the latest in a spate of assaults claimed by Iran-backed Houthi rebels pushed oil prices to above $70 a barrel for the first time since January 2020.
On Sunday, the Saudi Energy Ministry said an oil storage tank farm at the Ras Tanura export terminal on the country’s Persian Gulf coast was attacked by a drone from the sea. Shrapnel from a missile also landed close to a residential compound for employees of national oil company Saudi Aramco in Dhahran. The compound is home to families of Saudi and expat employees, and there’s a U.S. consulate nearby.
Brent crude rose as much as 2.9% to $71.37 a barrel on Monday, before paring gains. Oil had already received a boost from an OPEC meeting last week, when ministers agreed to keep a tight leash on supply.
Three Reasons Oil Prices Won’t Spike After Attack: David Fickling
Ras Tanura is the world’s largest oil terminal, capable of exporting roughly 6.5 million barrels a day — nearly 7% of oil demand — and as such is heavily protected. The port includes a large storage tank farm where crude is kept before it’s pumped into super-tankers. A refinery at the same site is Aramco’s oldest and largest.
A Saudi-led coalition has been fighting the Houthis since 2015. The conflict has killed tens of thousands of people and it has triggered what the United Nations says is the world’s worst humanitarian crisis.
On Sunday the Saudi-led coalition said a recent U.S. decision to revoke the designation of the Houthis as terrorists had fueled the rise in attacks. The Biden administration has moved to ditch the designation after the UN warned of famine. The administration of Donald Trump adopted the label toward the end of his time as president, and it was seen as a way of increasing pressure on Iran. Biden during his campaign pledged to rejoin a nuclear pact between Iran and world powers.
“The Houthi attacks on Saudi Arabia will likely further complicate efforts of the Biden administration to negotiate a follow-on nuclear agreement with the Iranians,” Helima Croft, the head of global commodity strategy and MENA research at RBC Capital Markets in New York, wrote in a research note.