Oil prices have been soaring Monday after a drone attack at Saudi Aramco’s Khurais oil field in Buqyaq, Saudi Arabia, forced the Kingdom to shut down over half of its daily production capacity.
The oil attack on the Saudi facility has left Donald Trump enraged, who went on an early Monday morning tweetstorm and threatened action against the culprits.
The Telegraph reports that Yemen’s Iran-backed Houthi rebels are claiming responsibility for the drone strikes that have wiped off 5.7 million barrels per day of crude oil production. This amounts to 5% of the global daily production capacity.
But U.S. Secretary of State Mike Pompeo has accused Iran of being directly involved in the Saudi oil attack.
President Trump, on the other hand, has adopted a more measured approach and is waiting for confirmation from Saudi Arabia over the attacks before taking any further step. Iran, however, says that the allegations against its involvement in the Saudi oil attack are baseless.
But officials in the Trump administration are of the opinion that Iran is lying.
ABC News quoted a senior Trump administration official saying:
It was Iran. The Houthis are claiming credit for something they did not do.
However, the Iran-backed rebel group is claiming that its drones are potent enough to “reach anywhere in Saudi Arabia,” which indicates that more oil installations in the country might be under threat.
And the Houthis might not be bluffing. The rebels’ drones reportedly have a range of 1,500 kilometers, so they were capable enough to carry out the attacks on Saudi oil facilities. According to reports, the drones needed to cover a distance of at least 950 kilometers from their base in Yemen to carry out the strike, which was well within their flying range.
While Donald Trump seems to have a finger on the trigger already in response to the attacks on Saudi oil installations, the U.S. president is also focused on restoring the balance in the oil market. To keep oil prices from shooting higher, Trump has decided to authorize the release of oil from the U.S.’ strategic reserve.
Secretary Pompeo has also toed the line of President Trump and said that the U.S. and its allies will work to restore oil supply.
Saudi Arabia, on the other hand, is reportedly in a rush to restore its oil production and get its capacity back online after the attack.
Increasing oil supply will be essential to keeping prices in check. The price of West Texas Intermediate (WTI) crude oil has shot up to nearly $60 per barrel post the attacks, while Brent crude is trading around $65.
The price of refined oil products such as gasoline and heating oil has also spiked in the high-single digits following the attacks. So, it is not surprising to see why Trump and U.S. allies are scrambling to boost oil supply, given that a high pricing scenario will hurt consumer spending and accelerate the chances of a recession, according to an analyst at S&P Global Platts.
This is something that Trump cannot afford right now as his trade war with China is already a sore point for the stock market, and consumers are already on the brink as the slowdown in the U.S. housing market shows.
Last modified: September 23, 2020 1:01 PM