Drone strikes knock out half Saudi oil supply
Persian Gulf stocks fall sharply
Iran on Sunday dismissed US accusations it was behind drone attacks on Saudi oil installations, saying blaming the Islamic Republic will not work.
“Having failed at “max pressure”, @SecPompeo’s turning to “max deceit”, US & its clients are stuck in Yemen because of illusion that weapon superiority will lead to military victory. Blaming Iran won’t end disaster,” Foreign Minister Mohammed Javad Zarif said on Twitter.
US Secretary of State Mike Pompeo on Saturday blamed Iran for the drone attacks which hit two of Saudi Arabia’s Aramco oil installations, saying that “Iran has now launched an unprecedented attack on the world’s energy supply.”
Yemen’s Houthi group claimed responsibility for the drone strikes, but Pompeo said "there is no evidence the attacks came from Yemen".
"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," the top US diplomat tweeted.
Saudi de facto ruler Crown Prince Mohammed bin Salman told US President Donald Trump by telephone that Riyadh had the will and capability “to confront and deal with this terrorist aggression,” according to Saudi state news agency SPA.
But Middle East experts say a tit-for-tat strike on Iranian oil fields is "highly unlikely”.
Trump told the crown prince that Washington was ready to work with the kingdom to guarantee its security, according to the White House.
The US Department of Energy also said it was ready to release oil from its strategic petroleum reserve if necessary. Energy Secretary Rick Perry also said his department would work with the International Energy Agency, which coordinates energy policies of industrialized nations, if global action is needed.
US Senator Lindsey Graham said Washington should mull bombing Iranian oil refineries.
“It is now time for the US to put on the table an attack on Iranian oil refineries if they continue their provocations,” said the veteran Republican lawmaker from South Carolina on Twitter Saturday.
In reaction, Commander of the Islamic Revolution Guards Corps (IRGC) Aerospace Force Brigadier General Amir Ali Hajizadeh said, “Everybody should know that all American bases and their aircraft carriers in a distance of up to 2,000 kilometers around Iran are within the range of our missiles”.
There were also other voices warning against a rush into escalation. US Senator Chris Murphy tweeted that the situation in the Middle East is not so simple to say “Houthis=Iran” and called Pompeo’s tweet “irresponsible simplification."
“This is such irresponsible simplification and it’s how we get into dumb wars of choice. The Saudis and Houthis are at war. The Saudis attack the Houthis and the Houthis attack back. Iran is backing the Houthis and has been a bad actor, but it’s just not as simple as Houthis=Iran,” Democratic lawmaker Murphy wrote.
Foreign Ministry spokesman Seyyed Abbas Mousavi on Sunday also dismissed Pompeo’s accusations, suggesting the United States was seeking a pretext to retaliate against Iran.
"Such fruitless and blind accusations and remarks are incomprehensible and meaningless," Mousavi said.
"Such remarks... are more like plotting by intelligence and secret organizations to damage the reputation of a country and create a framework for future actions," he said.
Tehran and Washington have been at loggerheads since May last year when President Donald Trump pulled out of a 2015 deal that promised Iran relief from sanctions in return for curbs on its nuclear program.
Since the withdrawal, the United States has imposed crippling sanctions on Iran as part of a campaign of "maximum pressure" and the Islamic Republic has responded by reducing its commitments to the nuclear accord.
"The Americans have taken the policy of ‘maximum pressure’ which has apparently turned into ‘maximum lying’ due to their failures," said Mousavi.
Saudi output down by half
Saturday's explosions set off fires that engulfed the Abqaiq plant, the world's largest oil processing facility, and nearby Khurais, which hosts a massive oil field.
Saudi's energy infrastructure has been hit by the Houthis many times before, but this strike is of a different order.
The full extent of the damage was not clear and reporters were kept away from the plants amid beefed-up security.
State-run oil company Saudi Aramco said the strikes would cut output by 5.7 million barrels per day, or about six percent of the world's oil supply, at a time when Aramco is gearing up for a stock market listing.
Aramco gave no timeline for when output would resume but said early Sunday it would give a progress update in around 48 hours. A source close to the matter said the return to full oil capacity could take “weeks, not days”.
The kingdom, the world’s top oil exporter, ships more than 7 million barrels of oil to global destinations every day, and for years has served as the supplier of last resort to markets.
Aramco has said it will dip into its stocks to offset the disruption, but the incident could batter investor confidence as its stock market debut looms.
The government hopes to raise up to $100 billion based on a $2 trillion valuation of the company in what would be the world's largest IPO, but the listing has been repeatedly delayed due to low oil prices, among other factors.
And newly appointed Energy Minister Prince Abdulaziz bin Salman said part of the drop would be offset by drawing on vast storage facilities designed to be tapped in times of crisis.
Riyadh has built five giant underground storage facilities across the country that can hold tens of millions of barrels of various refined petroleum products.
Saudi Arabia has spent billions on military hardware but recent events have underscored its infrastructure's vulnerability to attack.
While the kingdom's oil wells, scattered over a vast area, may be tough to hit, its various oil processing facilities are much more exposed.
In recent months, the Houthis have staged repeated cross-border missile and drone attacks targeting Saudi airbases and other facilities in what they say is retaliation for the Riyadh-led bombing campaign on Yemen.
Saudi stocks fell sharply on Sunday after the drone attacks. The decline extended a losing spree for Saudi stocks, which in recent weeks have been hit by expensive valuations, weak oil prices and concerns about the economic outlook.
The index opened down 2.3% but later pared some losses. The index has lost all its gains this year and is down about 18% from its 2019 high of 9,403 points seen in early May.
Saudi Basic Industries (SABIC), the kingdom’s biggest petrochemicals firm, was down 2.4% after it said it had curtailed feedback supplies by about 49% following the attacks.
Aramco has agreed to buy a 70% stake in SABIC from the state Public Investment Fund in a $69.1 billion deal that is awaiting regulatory approvals.
Other petrochemical companies such as Yanbu National Petrochemicals Co and Kayan also announced significant reductions in feedstock supplies.
“The stock market has been affected, especially the petchem sector, (as) the efficiency of some major companies will be about 50% in the coming 10 days,” said Mazen al-Sudairi, the head of research at Al Rajhi Capital.
Other Persian Gulf markets also reacted negatively to the attacks, with Kuwait’s premier index down 0.4% and Dubai stocks falling 0.5%, although they recovered from sharper intraday losses.
AFP, AP and Reuters contributed to this story.