ABU DHABI (Rahnuma): When drones targeted the facilities of Saudi Aramco on Saturday, they signaled not only a new phase of a terror campaign against Saudi Arabia but also the determination of malign regional actors to disrupt global oil supplies, cripple energy-reliant economies and stir Middle East tensions.
Saudi Aramco operates the world’s largest single hydrocarbon network, the Master Gas System. Its crude oil production total was 3.4 billion barrels (540,000,000 m3), and it manages over one hundred oil and gas fields in Saudi Arabia, including 288.4 trillion standard cubic feet (scf) of natural gas reserves. Saudi Aramco operates the Ghawar Field, the world’s largest onshore oil field, and the Safaniya Field, the world’s largest offshore oil field.
The attacks on critical oil production facilities in Saudi Arabia over the weekend will effectively wipe out the world’s spare oil capacity, an expert from S&P Global Platts said on Monday.
“This heightens the risk premium, it puts a lot of pressure on the supply side,” said Sarah Cottle, global head of market insight at S&P Global Platts.
“This incident effectively eliminates the world’s spare capacity,” Cottle told CNBC’s “Squawk Box” on Monday, though she added the longer-term outlook is bullish due to the immediate need to draw down on crude stockpiles.
International benchmark Brent crude oil price spiked by as much as 19% on Monday to $71.95 a barrel while U.S. West Texas Intermediate (WTI) jumped more than 15% to a session high of $63.34 a barrel, before gains were pared later.
Brent crude was up 9.9% at $66.19 a barrel, while WTI was up 8.9% at $59.71 a barrel at 1:22 p.m. HK/SIN.
Japan is a net importer of oil. It gets nearly 85 percent of its oil from Gulf Cooperation Council members. A staggering 40 percent of its oil comes from Saudi Arabia, so it is no wonder that in the eyes of the Japanese, the attack impinges on their country’s national security, and is felt and seen as such.
The dreadful attack comes as Japan deals with the aftermath of typhoon Faxai. A week after it ripped through Chiba, there are still about 430,000 households living without power, so the last thing this thriving country needs is yet another disruption in its energy supply.
As such, an unhindered and uninterrupted production of oil, and its safe passage through the Strait of Hormuz, is an absolute necessity for Japan’s continued growth.
The full force of the attack on Saudi Arabia’s oil facilities does not just affect Japan. It affects the whole world — and the whole world needs to recognize that fact.
A statement from Saudi Aramco on Saturday said the attacks would see a production suspension of 5.7 million barrels of crude oil per day. That amount represents about half of the Kingdom’s output, which is some 6 percent of the global oil supply — removing that quantity from the market, even for a short time, will have serious repercussions.
While many countries expressed solidarity with Saudi Arabia, it is unfortunate that such a dramatic event did not garner enough of the right kind of attention in the international media. The perpetrators were not challenged as they should have been, and certainly not as they deserved to be.
This may partly be due to ignorance, but we cannot discount that fault-finding and dislike of Saudi Arabia is the new norm in much of the Western media. Outlets and publications are quick to portray Riyadh in a negative — and mostly inaccurate — light.
Many may think that because Saudi Arabia is rich, they need not worry about what happens there. Worse, they may feel that because of its riches it deserves what has happened to it. These people forget the country is the land of the Two Holy Mosques, and sacred to the world’s Muslims.
We have seen similar apathy and a lack of concern and outrage when the Houthis attacked sites near the holy city of Makkah. People forget that in a region consumed by hatred and sectarian differences, it is Saudi Arabia which is leading the fight against terrorism. It is Saudi Arabia which has kept oil prices in check and the oil market stable through continued supply. It is Saudi Arabia which has ushered in reforms in order to become a modern nation. It is Saudi Arabia which has helped prevent many terror attacks on Western soil, and it is Saudi Arabia which has worked, sometimes to its own disadvantage, to maintain the free flow of oil to countries around the world.
It is unfortunate that people do not understand that when such an attack happens, the victims go far beyond the oil companies and the Saudi people, to include babies in incubators in hospitals and children in schools all around the globe. Imagine the consequences if the world’s biggest oil producer were forced to stop producing because of such attacks. Millions of innocent people would suffer. Their daily lives would be affected. If the price of oil shoots up, it is the ordinary men and women at the pumps in the US, Europe, and Asia who will bear the consequences. It is, therefore, a direct attack on all peace-loving people, their ways of life, their economic security and well-being.
The world must stand together in condemning the attacks, and take serious steps to prevent rogue countries and violent militias from hijacking our ability and our right to live normal and peaceful lives.