Photo: Collected
Yemen’s Houthis have claimed a fresh attack on a facility of Saudi Aramco, Saudi Arabia’s state energy company. Oil prices jumped on the world market on the news. Amid fresh concern over energy supply in the Middle East, the price of Brent crude rose by more than 3 percent on the international market on Thursday.
November futures of Brent crude, the main benchmark for oil prices on the world market, at one stage crossed $108 per barrel on Thursday. At the end of the day the price was above $106.50. Although it fell somewhat on Asian markets on Friday morning, it remained above $105.
Concern over energy supply on the world market had already been rising because of the conflict in the Middle East. Alongside the ongoing US-Israel war centring on Iran and major disruption to shipping in the Strait of Hormuz, Saudi Arabia’s oil infrastructure has also come under the risk of attack.
Claim of attacks on Riyadh and Aramco facility
On Thursday the Houthis claimed they had carried out missile and drone attacks targeting a ‘sensitive target’ in the Saudi capital Riyadh and an Aramco facility in the Red Sea coastal city of Yanbu. A statement published on the Houthi-controlled Yemen News Agency said both operations ‘successfully achieved their objectives’.
However, the Saudi authorities did not confirm whether there was any damage or casualties in these attacks. Major General Turki Al-Maliki, spokesperson for the Saudi-led coalition, said six Houthi ballistic missiles fired towards Taif and Yanbu had been intercepted.
Yanbu is an important hub of Saudi Arabia’s oil infrastructure. The port’s importance as an alternative route for Saudi oil exports has grown further since complications arose in the Strait of Hormuz.
Concern growing around Aramco
Saudi Aramco is one of the world’s most important energy companies. As a result, there are fears that the supply crisis on the world market will become more acute if there is a major attack on its production, processing or export infrastructure.
Saudi energy infrastructure has come under attack several times in recent weeks. Operations of the East-West oil pipeline were shut down after a drone attack in mid-September. This pipeline connects the oilfields of the eastern region with Yanbu port and allows oil to be transported bypassing Hormuz. According to Reuters, Saudi Arabia has since tried to increase exports through the eastern Gulf ports, and the transport of Saudi oil through Hormuz has also increased compared with before.
Fresh tension amid diplomatic efforts
Oil prices rose at a time when diplomatic efforts are under way between the United States and Iran on the sidelines of the United Nations General Assembly session. Efforts are being made for contact between the two sides to find a possible solution to end the seven-month-long conflict.
Iranian President Masoud Pezeshkian on Thursday expressed hope that Washington would return to the earlier memorandum of understanding on ending the war before the US midterm elections in November. However, that understanding effectively became defunct in mid-August without any peace deal.
According to market analysts, the diplomatic initiative may ease the upward pressure on prices somewhat. But as long as important energy supply routes and infrastructure remain at risk, an additional risk premium may persist in the market.
Tim Waterer, chief market analyst at Sydney-based KCM Trade, told Al Jazeera that oil prices are still quite high compared with the post-war period because important supply routes and facilities are still at risk. In his view, although diplomatic efforts on the sidelines of the UN session have brought some balance to the market, prices may remain under upward pressure until there is clear evidence of a lasting reduction in tension.
Oil may stay above $100 if war continues
June Goh, senior oil market analyst at Singapore-based Sparta Commodities, thinks oil prices are likely to stay above $100 per barrel if the Iran war continues. She said the shortfall in oil stocks worldwide is widening further as there is no clear resolution to the conflict.
Earlier, concern over supply had risen because of the attack on the East-West pipeline and disruption to exports through Yanbu. Although Saudi Arabia has tried to manage the situation through alternative routes, both important sea routes, Hormuz and Bab al-Mandeb, are now under the shadow of regional conflict.
As a result, the Houthis’ latest claim of attack has not only raised fresh questions about Saudi Arabia’s security, it has also heightened concern over the stability of energy supply on the world market. Its immediate reflection has been seen in oil prices.
