Global oil market spikes after Saudi drone attack

Tensions rise in the Middle East, with Saudi Arabia ready to dismiss earlier attacks by the Yemeni Houthis as minor aggressions compared to the current crisis. Now, half the Saudi oil production is at a standstill.

The world’s largest oil refining plants in Abqaiq were attacked by drones on September 14th. 5% of the world oil supply was disrupted by the resulting fires and explosions, threatening the international oil market. Oil prices in Asia surged more than 10%.

US blames Iran

The Iran-linked Houthi rebels, who are at war in Yemen against Saudi Arabia, claimed responsibility for the attacks on the huge Abqaiq refinery. President Trump considers Iran a major threat to the worldwide oil supply. To prevent the rise of oil prices, Trump says that he will take measures. Trump tweeted: “Based on the attack on Saudi Arabia, which may have an impact on oil prices, I have authorized the release of oil from the Strategic Petroleum Reserve, if needed, in a to-be-determined amount…’’

US underground petroleum reserves

The oil Trump referred to amounts to more than 640 million barrels stored in salt caverns beneath the states of Texas and Louisiana. The idea of holding these “strategic reserves” began in the 1970s, BBC reported on Monday. According to the US Energy Information Administration of 2018, Americans used on average 20.5 million barrels of petroleum every day.

According to a report by The Guardian, Saudi state-owned Aramco said it will also dip into its reserves to offset the disruption. On Saturday, CEO Amin Nasser said that “work is underway” to reestablish production, but the attack could still affect investor confidence ahead of Aramco’s stock market debut. A significant volume of oil production can be restored within days. But the company will need weeks to reach full output again, Bloomberg News reported on Sunday.

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