Saudi Arabia, Iran, USA and oil

One of the world’s riskiest situations is developing in one of the most volatile regions of the world, the Middle East, after oil production facilities were bombed by drones. The US has blamed Iran. The US has close ties with Saudi Arabia.

Oil production has been affected, with prices surging following the attack (but settling back a bit since).

MSN: Saudis face lengthy oil halt with few options to fill gap

The oil market is facing a prolonged disruption to Saudi Arabia’s oil production with few options for replacing such huge output losses.

The weekend attacks on the kingdom eliminated about 5% of global oil supply — and raised the risk of more conflict in the region — propelling Brent crude to a record surge on Monday. Officials at state oil company Saudi Aramco have become less optimistic on the pace of output recovery, telling a senior foreign diplomat they face a “severe” disruption measured in weeks and months and informing some customers that October shipments will be delayed.

The historic price gain underscores the unprecedented nature of the disruption caused by the drone attack on the Abqaiq crude processing plant. For decades, Saudi Arabia has been the oil market’s great stabilizer, maintaining a large cushion of spare production capacity that can be tapped in emergencies, such as the 2011 war in Libya.

The halt of 5.7 million barrels day of the kingdom’s production — the worst sudden supply loss in history — exposes the inadequacy of the rest of the world’s supply buffer.

Petrol prices have already risen in New Zealand. I don’t know why that has happened so quickly, petrol in tanks here should be the same price as it was last week. Is there any other market that changes prices based on possible future cost rises?

ABC News:  U.S. intel shows cruise missiles fired at Saudi oil facility came from Iran, officials say

The attack on a major Saudi oil facility originated geographically from Iranian territory, with a series of low-altitude cruise missiles fired from at least one location in the western region of the country, according to two U.S. officials familiar with the latest intelligence.

The intelligence assessment draws a more clear link between the attack and Iran, and it could worsen tensions between Washington and Tehran.

U.S. officials are considering possible multilateral sanctions with allies against Iran as part of the response to the attacks…

The Department of Defense has advocated for restraint. But it has provided a briefing on military options to President Donald Trump, who over the weekend tweeted that the U.S. is “locked and loaded” and ready to respond, once it officially determined who was behind the attack.

Three U.S. officials previously told NBC News there was extremely compelling evidence showing the origination point of the strikes, and one official with direct knowledge described that evidence as imagery.

That’s image based imagery, not imaginary.

A Saudi military spokesman says initial investigations show Iranian weapons were used in the attack.

Iran’s Supreme Leader Ayatollah Ali Khamenei said Tuesday no talks would take place between Iran and the U.S. “on any level…

Reuters: U.S. lawmakers blast Iran, wary of war, after Saudi oil attack

Members of the U.S. Congress blasted Iran after the attack on Saudi Arabian oil facilities, but expressed wariness about U.S. military action, especially before they have a clearer picture of who was behind it.

President Donald Trump said the United States was “locked and loaded” to hit back after Saturday’s attack, which knocked out more than half of Saudi Arabia’s oil production and damaged the world’s biggest crude processing plant.

Iran denied U.S. accusations it was to blame and said it was ready for “full-fledged war.”

U.S. lawmakers, especially Trump’s fellow Republicans, were quick to blame Tehran.

Mitch McConnell, the Senate’s Republican majority leader, called it “a brazen attack” with significant implications for the global energy market and said he welcomed Trump’s preparation to potentially release oil from the Strategic Petroleum Reserve to stabilize markets if necessary.

Many lawmakers stressed that Congress, not the president, has the right to declare war and warned against any quick military action.

Trump may not be able to initiate quick military action on his own, but he is capable of escalating tensions and the prospects of war via Twitter.

Military action would likely put oil production and supply at even more risk.

Congress, with backing from both Republicans and Democrats, has passed – but Trump has vetoed – four bills seeking to push back against Trump’s strong support for the Saudi government, despite its human rights record and steep civilian casualties in the war in Yemen.

Trump and the US say nothing against Saudi Arabia’s involvement in the Yemeni war – and supply the Saudis with arms.

Wikipedia:  2017 United States–Saudi Arabia arms deal

On May 20, 2017, U.S. President Trump and Saudi Arabia’s Salman bin Abdulaziz Al Saud signed a series of letters of intent for the Kingdom of Saudi Arabia to purchase arms from the United States totaling US$110 billion immediately, and $350 billion over 10 years. The intended purchases include tanks, combat ships, missile defense systems, as well as radar, communications and cybersecurity technology. The transfer was widely seen as a counterbalance against the influence of Iran in the region and a “significant” and “historic” expansion of United States relations with Saudi Arabia.

Saudi Arabia is a key U.S. ally in the Middle East.

Between 2011 and 2015, Saudi Arabia was the destination for nearly 10% of all U.S. arms exports

The 2017 deal was partially created with the help of Jared Kushner, son-in-law of and senior advisor to President Trump

So the attack on the Saudi oil production facilities raises tensions significantly between the US and Iran. The risks may temper responses, but I think it likely that there will be some sort of retaliation.  Economic sanctions are already in place against Iran, so that must be a limited option. If Iran is indeed responsible for the attack it may in part be an attempt to enhance the value of their own oil to compensate for sanctions.

Whatever, it’s complex and it’s a high risk game being played in the Middle East that could significantly impact on the world.

 

 

Leave a comment

29 Comments

  1. US intelligence = fake news.

    Reply
    • Gezza

       /  18th September 2019

      Yes, quite possibly. The world by now ought to have learned to be very wary about claims of imagery evidence showing declared enemies of US Presidents to be the source of attacks on American human or physical assets or those of regimes they are arming.

      Trump is pursuing Israel’s agenda in the ME, rather than the US’s or the greater world’s.

      Neverthesless, the savagery & comprehensiveness of Trump’s sanctions are hitting Iranaians very hard, the religious ideological fanaticism of that country’s theocracy makes their surrender to his will impossible, & it is utterly facile for The Trump Circus to assume a people under such a devastating & frustrating US economic attack might perhaps rise up & overthrow their government. Increased patriotism & hatred toward their oppressors are far more likely.

      However, I am now in no doubt that the Iranians ARE hitting back, despite their denials, in the series of events such as the tanker bombings & taker seizures, & in their practical & tactical support for the Houthi rebels (Shia, I think…).

      I did a search on Iran’s military capacity not long ago & gound a video that showed their inventiveness & self reliance has empnabled them to even field a significantly large & upgraded air forcce. Their ability to mount asymetric attacks through assets & allies in Lebanon, Yemen, Syria, Iraq & probably a few other places, & their (I believe) willingness to take suicidal risks & accept casualties make them a very dangerous adversary.

      Iran’s mountainous geography makes the place easy to defend on the ground, although the US would no doubt try to operate as safely and remotely from direct danger to their truppen as possible.

      Starting a war with Iran will be a disaster for the US & their allies.

      Reply
      • Gezza

         /  18th September 2019

        🙄 soz re typos. Need breakfast. Even Elvira the eel gets fed before I do.

        Reply
      • “Trump is pursuing Israel’s agenda in the ME”

        The latest exit polls (as at 8:30am NZT) suggest that Netanyahu will not get the 61 seats he needs to hold power in the Knesset. A centrist alliance under Benny Gantz might change that agenda quite substantially.

        Oh, and Trump is also pursuing the KSA agenda for the ME as well. Frankly it wouldn’t surprise me in the slightest if the minor damage to the Abqaiq refinery is another Gulf of Tonkin crisis, fomented and coordinated by KSA to raise tensions against their enemies.

        What an unholy alliance: Trump, Israel, and KSA.

        Meanwhile Putin sits back laughing and offering KSA Russian-made defensive systems to replace the US equipment that “failed to protect” the Abqaiq refinery.

        Reply
        • Gezza

           /  18th September 2019

          Interesting. What’s KSA?
          Netanyahu has been promising, if elected PM to officially annex all the illegal settlements.

          Reply
          • Trevors_elbow

             /  18th September 2019

            Keep up lad. KSA is the Kingdom of Saudi Arabia…

            You watch Al Jeez… should know that!

            Reply
            • Gezza

               /  18th September 2019

              Oh, sorry. He should’ve said & saved me having the time wondering about it & having to make a query. Also, on Aljaz tv they NEVER call it the KSA. Only Sowdee Arabia if Western English speakers, or “Sa-u-di Arabia” or simply “the Sa-u-di” if they’re Arabs.

        • Pink David

           /  18th September 2019

          “What an unholy alliance: Trump, Israel, and KSA.”

          Why did you miss Russia out?

          Reply
      • Pink David

         /  18th September 2019

        “I did a search on Iran’s military capacity not long ago & gound a video that showed their inventiveness & self reliance has empnabled them to even field a significantly large & upgraded air forcce”

        If you believe that, you will believe anything. The Iranian Airforce would be brushed away in a couple of hours at most in any serious conflict with the US. A handful of reverse engineered F5’s won’t make the slightest difference. The C3 advantage is simply massive.

        Reply
        • Gezza

           /  18th September 2019

          You need to do a bit more research yourself. They may have a hotch potch collection of serviceable aircraft that is bigger than you imagine & where they are how they use it tactically we fon’t know.

          Reply
          • Pink David

             /  18th September 2019

            The difference between a few junkers and a lot of junkers is meaningless. Maybe they will use them al-Aqsa style, maybe they have some other strategy, but the simply truth is they are not going to have any significant impact against a serious US force.

            Middle Eastern forces have performed massively under their retaliative strength in every conflict for more than one hundred years. The idea that Iran is in any way a serious opponent of the US in a significant conflict is nonsense.

            Reply
            • Gezza

               /  18th September 2019

              They’re not going to fight them head-on on a battlefield or in the air. That would be suicidal madness.

              But even the Patriot system fails when cinfronted with large numbers of relatively unsophisticated missiles & it seems they have that, their asymetric reach is wide thru allies & IRGC officers & advisers in the field in different theatres, & their defences are in depth with & many of their assets are stockpiled in impervious locations.

              They don’t have a lot of Junkers, they have a fairly wide array of various types of older but still high performance fighter/bomber/ground attack aircraft (including F4’s & I think some French jobs) some of which are still dangerous & it would I reckon be premature to dismiss those as irrelevant. Damaged runwsys can be repaired relayively quickly.

              Remind me. How long did it take the US to defeat the Taliban after neutralising their air force?

            • Pink David

               /  18th September 2019

              “They don’t have a lot of Junkers, they have a fairly wide array of various types of older but still high performance fighter/bomber/ground attack aircraft (including F4’s & I think some French jobs) some of which are still dangerous & it would I reckon be premature to dismiss those as irrelevant. ”

              They are irrelevant. The Iraqi Air Force in 1991 was much larger, had better, or equivalent equipment and was combat experienced. It did not survive the first day of combat. The ‘French jobs’ are Iraqi F1’s that fled from that massacre.

              “Remind me. How long did it take the US to defeat the Taliban after neutralising their air force?”

              They didn’t. There were defeated by Noor and Dostum’s forces in the two months roughly mid Oct – mid Dec 2001, supported by US airpower and a handful of US troops.
              The largest US force on the ground was a Marine brigade from TF58 of 1500 at Rhino, it did very little other than underpin that route SE of Kandahar.

            • Gezza

               /  18th September 2019

              The Taliban, more’s the pity, for the people, & the womenfolk especially, of Afganistan, is undefeated. Probably undefeatable.

    • Corky

       /  18th September 2019

      Come on Arty..that’s like believing your chaps were made in China.

      Reply
  2. Gerrit

     /  18th September 2019

    Wonder how long the prices will spike when oil production will be at capacity again within three weeks.

    “Crude prices abruptly fell nearly 6 per cent yesterday, retreating on a report that Saudi Arabia would recover from a devastating attack on its oil supply chain sooner than expected.”

    https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12268577

    Interestingly the Saudi’s only supply 10% of the USA market (41% from Canada)

    “In the third quarter of 2018, the U.S. imported roughly 10.2 million barrels of petroleum per day,3 with the largest amounts coming from Canada (41%) and Saudi Arabia (10%).

    In the third quarter of 2018, the U.S. exported roughly 7.5 million barrels of petroleum per day. The largest markets for U.S. petroleum exports are Mexico and Canada, but the U.S. exports petroleum to 180 countries.”

    https://www.americangeosciences.org/critical-issues/faq/how-much-oil-does-us-export-and-import

    The effect of the Houit strike against Saudi oil is minimal.

    But profit taking from local New Zealand distributors is what Megan Woods should be aware off and ready to clamp down hard on. Z put prices up by 9 cents per litre on products that were in the local “pipeline” and unaffected by events, before coming back to 6 cents increase when no one else moved to gather larger profits.

    But as the price of fuel goes up, so does the tax take. Expect Labour to do very little on the fuel pricing. Much gnashing of teeth, hand wringing and “serious conversations” to be rhad but no action to help those on low wages afford fuel.

    Reply
  3. Corky

     /  18th September 2019

    One good thing about this situation – Trump has shown so far he’s not a hawk. He prefers to talk tough. That said, Iran must be spanked hard if the proof is overwhelming they bombed Saudi oil fields.

    I agree with Pete, re petrol prices: how come prices rose so fast?

    Reply
  4. Trevors_elbow

     /  18th September 2019

    Iran doing this/allowing this to happen is a sign they think they are unstrikable?

    Be interesting to see if they test detonate a nuclear device with western media observers in the near term….

    Reply
    • Gezza

       /  18th September 2019

      Iran has got a helluva lot of missiles whose range & targetting capabilities they have learned to enhance given nobody else would supply them. And they’ve got plenty of reserves parked up in tunnels in their numerous mountains, from what I’ve gleaned recently.

      Interesting observation abput their possibly trying to demo test a nuclear device soon. Pretty sure they’re not near enuf to that stage yet, & it’s almost a certainty Israel will strike their nuclear weapon production facility well before they get there.

      Reply
  5. Alan Wilkinson

     /  18th September 2019

    Shows how half-witted and destructive our Govt ban on oil and gas exploration is.

    Reply
    • Gezza

       /  18th September 2019

      I heard (but possibly only on Aljaz, from a commentator whose expertise is unknown) that the US is now the world’s largest supplier of oil? If so, they will be benefitting economically from this crisis & one wonders if that’s intentional?

      Reply
      • Pink David

         /  18th September 2019

        ” that the US is now the world’s largest supplier of oil?”

        The US is the worlds largest producer of oil.

        ” If so, they will be benefitting economically from this crisis & one wonders if that’s intentional?”

        No. Oil is a net cost to the US. Its not a one trick pony economy like Norway.

        Reply
        • Gezza

           /  18th September 2019

          How is it a net cost & why would oil companies there be exploiting it they weren’t raking in the greenbacks?

          Reply
          • Pink David

             /  18th September 2019

            Because the users of oil in the US are far more numerous than the producers. Oil and gas is less than 2% of US GDP. Cheap oil is better for America, that is clear to anyone unless they have a conspiracy to sell.

            Reply
            • Gezza

               /  18th September 2019

              Ah. I see. 👍🏼

              Don’t worry about the downtick, that was just for your snipe at the very end.

    • That’s generous. I had it pegged at less than a third of a wit.

      Reply
    • Duker

       /  18th September 2019

      Funnily enough a Company has just pulled its oil drilling rig from offshore Taranaki- it wasnt doing exploration it was supposed to be an ‘oil well’ in an existing field .
      Guess what …it was DRY .
      We would be better off plugging into the international trade for LPG or natural gas bought in by tanker than endless drilling of dry wells for nothing

      Reply
      • Alan Wilkinson

         /  18th September 2019

        “We” is your mistake, Duker. The exploration companies take the risks and bear the costs of dry wells, not us.

        Reply
        • Duker

           /  18th September 2019

          ‘We’ would have to build a LNG import terminal , probably at New Plymouth. My family was drilling for Oil in NZ back in the 1880-90s , we have pictures

          Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s