- The Washington Times - Friday, February 24, 2006

ASSOCIATED PRESS

Crude oil futures jumped 4 percent yesterday after a thwarted attack on a massive oil facility in Saudi Arabia rattled a market already jittery about supply disruptions in Nigeria and Iran’s nuclear ambitions.

Saudi Arabia is the world’s largest oil producer, with output of about 9.5 million barrels per day, or 11 percent of global consumption. The target of the attack, the Abqaiq oil complex in eastern Saudi Arabia, processes about two-thirds of the country’s oil before it is exported.

Suicide bombers in explosives-packed cars attacked the heavily guarded facility but were foiled when guards opened fire, detonating the vehicles and killing the attackers, Interior Ministry spokesman Lt. Gen. Mansour al-Turki said. The vehicles exploded outside the first of three fences around the sprawling complex.

Saudi Oil Minister Ali Naimi said the attack caused “a small fire” that was brought under control and that operations were not affected. But the incident heightened supply fears on world oil markets.

Light sweet crude for April surged to $63.25 a barrel before settling at $62.91, up $2.37, on the New York Mercantile Exchange.

While terror attacks are not new to Saudi Arabia — there were two highly publicized attacks against oil company offices and employee compounds in the spring of 2004 — analysts said yesterday’s action was noteworthy because of how close the perpetrators came to a facility integral to the flow of oil.

“It’s new in the sense that this is the boldest attempt to strike at the heart of a Saudi oil-production complex,” Eurasia Group analyst Antoine Halff said. “So far they had been confined to office buildings and housing units.

“At the same time, what this attack demonstrates is not just how much the oil is a target, but how prepared the Saudis are.”

UBS energy economist Jan Stuart said the market reaction was “measured” given the site’s prominence the ability of the attackers to get so close to it.

Aside from its total output, Saudi Arabia is a vital supplier to the global market because it is the only country with significant spare production capacity. If necessary, Saudi Arabia says it could quickly boost production by 1.5 million barrels a day.

No other country could add meaningful output to offset an unexpected disruption. The emergency supply of last resort would be the 4 billion barrels of stocks that the International Energy Agency lays claim to.

Oil prices had started the day higher as persistent concerns over Nigerian supply disruptions and Iran’s nuclear program overshadowed U.S. government data showing gains in domestic crude supplies.

Oil prices spiked earlier in the week on news that Nigerian militants attacked a pipeline switching station operated by Royal Dutch Shell PLC and a boat they claimed housed Nigerian military personnel. That, and an earlier attack, forced Shell to halt the flow of about 455,000 barrels a day.

Nigeria is Africa’s leading oil exporter and the United States’ fifth-largest supplier, usually exporting 2.5 million barrels daily.

Traders also remain concerned over the situation in Iran, which has offered the International Atomic Energy Agency, the United Nations’ nuclear watchdog, information on a secret project that U.S. intelligence has linked to a potential nuclear arms program, two diplomats said yesterday.

Iran is the second-largest oil producer in the Organization of Petroleum Exporting Countries, and analysts worry that sanctions or any other actions the West might take against Tehran could disrupt the flow of oil there.

Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times is switching its third-party commenting system from Disqus to Spot.IM. You will need to either create an account with Spot.im or if you wish to use your Disqus account look under the Conversation for the link "Have a Disqus Account?". Please read our Comment Policy before commenting.

 

Click to Read More

Click to Hide