Bulletin
Investor Alert

Market Extra Archives | Email alerts

Sept. 16, 2019, 3:47 p.m. EDT

Why the Saudi oil attack is a ‘big deal’ that could be a ‘game changer’ in stock markets and crude prices

S&P Global Platts forecasts $5 or $10/bbl. spike in Brent oil prices

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    iShares MSCI Saudi Arabia ETF (KSA)

or Cancel Already have a watchlist? Log In

By Mark DeCambre, MarketWatch


AP
This Saturday, Sept. 14, 2019, satellite image provided by NASA Worldview shows fires following Yemen's Houthi rebels claiming a drone attack on two major oil installations in eastern Saudi Arabia.

An intensifying Middle East conflict is threatening to throw the world’s energy market into disarray after weekend drone attacks destroyed parts of Saudi Aramco’s Abqaiq plant — one of the world’s largest processors of oil — and a separate nearby oil field.

On Saturday, the drone attacks, directed at Saudi Arabian oil facilities that account for nearly 10 million barrels of crude-oil production, resulted in massive plumes of black smoke emanating from the oil field, and a shutdown that could lead to about 50% of its production being at least temporarily thrown offline.

Prominent crude-oil strategist Phil Flynn at Price Futures Group told MarketWatch on Sunday that the drone strike was a “big deal” that could result in a major spike in crude-oil prices, because of the potential disruption to global supplies.

Read: Saudi oil sites shut production after hit by Yemen’s Houthi drones

This isn’t the first such strike in the region, but this most recent attack highlights the vulnerability of Arabian Peninsula’s oil production and the far-reaching implications of political clashes in the Middle East on the rest of the world.

Here’s what investors need to know about the weekend drone strikes and the implications for global markets:

What happened?

Ten automated, aerial, combat drones launched an attack on Saudi Aramco’s Abqaiq plant in Buqyaq and the Khurais oil field on Saturday at 3:31 a.m. and 3:42 a.m. local time, according to Gulf News .

Saudi Aramco describes Abqaiq as “the largest crude oil stabilization plant in the world,” and the Khurais is considered Saudi Arabia’s second-largest oil field (see map below):


via Gulf News

The attacks are believed to be part of a continuing conflict between Yemen’s Houthi rebels and Saudi Arabia, which harks back to a 2014 takeover of Yemen’s largest city, San’a, by the Houthis. Saudi-led coalitions have launched military campaigns to stem the Houthis’ expansion.

Over the years, Saudi-led airstrikes have killed Yemeni civilians, while the Houthis have used drones and missiles to attack Saudi Arabia and have also targeted vessels in the Red Sea.

Saturday’s drone attack is being described as the biggest on Saudi Arabia’s oil infrastructure since Iraq’s Saddam Hussein in 1990s fired missiles into the kingdom during the first Gulf War.

On Saturday, Secretary of State Mike Pompeo blamed Iran for the Saudi attacks. However, he also said there was no evidence that the weekend’s drone strike came from Yemen.

“We call on all nations to publicly and unequivocally condemn Iran’s attacks. The United States will work with our partners and allies to ensure that energy markets remain well supplied and Iran is held accountable for its aggression,” Pompeo said on Twitter .

Iran’s President Hassan Rouhani has denied any involvement in the Saudi strikes.


AFP/Getty Images
A picture taken on September 15, 2019 shows an Aramco oil facility near al-Khurj area, just south of the Saudi capital Riyadh. - Saudi Arabia raced today to restart operations at oil plants hit by drone attacks.

The drone attack also comes amid tensions between Tehran and Washington after the U.S. pulled out of a global nuclear pact and imposed fresh sanctions against Iran to force it to curb its ambitions to create a nuclear-weapons program.

1 2
This Story has 0 Comments
Be the first to comment
More News In
Markets

Story Conversation

Commenting FAQs »

Partner Center

World News from MarketWatch

Link to MarketWatch's Slice.