Don’t expect Houthi attack on Saudi oil facility to move markets far
Prices barely moved when a Saudi oil pipeline and tankers came under attack in May
Saturday’s attack on a gas facility in the southern Saudi Arabian field of Shayba will prove a test case of whether geopolitics have any impact on the current low price environment.
The attack claimed by Houthis targeted a natural gas liquids (NGL) facility in the Shayba oil field, which has a production capacity of 1 million barrels per day (bpd) and is more than 1,000 kilometres away from the northwestern Yemeni territory controlled by the rebel group.
Brent closed on a positive note on Friday at $58.64 per barrel, after losing 4 per cent of its value that week as the trade war between the US and China, the world’s biggest economies, escalated and dampened demand for crude. The trade conflict between the biggest global producer of crude and the top buyer of the commodity had restricted Brent price moves in a tight band between $60 and $67 over the past couple of months.
The attack is likely to have a “moderate, positive impact on oil prices” but economic concerns around the trade war may drown that out, says Robin Mills, chief executive at Qamar Energy.
“This attack is an escalation towards a more serious attack, as it’s caused some damage, that’s interesting but not really critical damage,” he said.
Saudi Arabia’s ample spare capacity could easily offset any direct threat to the kingdom’s crude oil output, he said.
Prices also barely moved when tankers transiting the congested Strait of Hormuz, through which a third of the world’s seaborne oil passes, came under attack, as Brent remained weighed down by low demand.
The Saturday attack is not the first against a Saudi Arabian oil installation. In May, armed drones operated by the Houthis targeted an East-West pipeline with a capacity to transport up to 5 million barrels per day of crude from the oil-rich Eastern Province to export terminals facing the Red Sea in the country’s west.
Saudi Aramco, which had called the earlier attack targeting two oil pumping stations along the pipeline a threat to global oil supply, had a similar response to the latest attack.
The Saudi energy minister Khalid Al Falih said the damage, which caused a fire in the NGL facility associated with the oil field, was meant to threaten global supply, while assuring markets that its oil production was not affected.
“One of the units of a natural gas plant in the Shaybah petroleum field was attacked by drones, resulting in a controlled fire – causing limited damage and no human injuries, thankfully,” said Mr Al Falih.
“The kingdom’s oil production was not affected by the terrorist act,” he said in comments reported by the Saudi Press Agency.
Saudi Arabia is the world’s largest exporter of oil, with any threats to its production or ability to export likely to have a significant impact on the oil markets.
Updated: August 18, 2019 05:08 PM