Iran attack on giant Saudi refinery pushes up oil prices
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A Saudi oil refinery — one of the world's largest — suffered "limited" damage overnight from an Iranian attack, per the kingdom's press agency and multiple news reports.
Why it matters: "The attack on Saudi Arabia's Ras Tanura refinery marks a significant escalation, with Gulf energy infrastructure now squarely in Iran's sights," Torbjorn Soltvedt, a top analyst with risk intelligence firm Verisk Maplecroft, said in a note.
- The overall conflict — which included new strikes in Qatar — will push up U.S. gasoline prices, though the amount and duration depends on how high oil prices climb and for how long.
Driving the news: The refinery "sustained limited damage as a result of debris from the interception of two drones in its vicinity," Saudi's state news agency said Monday.
- There was a "limited" and now-contained fire, with no injuries reported. But "some operational units at the refinery were shut down as a precautionary measure."
- Iran's deputy foreign minister, Majid Takht-Ravanchi, denied his country was behind the attack.
- "We have already been in touch with our Saudi brothers, and we have talked about this issue. Iran is not responsible for the attack against the oil installations in Saudi Arabia," Takht-Ravanchi told CNN.
Meanwhile, QatarEnergy said two of its operating facilities also were attacked and that it was halting production of liquefied natural gas and associated products.
- Qatar's state-owned oil and gas enterprise is responsible for nearly 20% of global LNG exports.
The big picture: Prices spiked when markets opened last night, with the global benchmark Brent crude hitting $82 per barrel, and then receded somewhat.
- But prices have risen again this morning on news of the refinery attack.
- Brent is trading at $79 a barrel this morning, up nearly 9% from Friday's close.
Yes, but: The relatively limited rise suggests that traders are not yet predicting a worst-case scenario that does massive, lasting damage to oil infrastructure in Gulf states, which would send prices skyrocketing.
Zoom in: The Ras Tanura refinery can process 550,000 barrels per day and is close to a separate crude oil export complex.
- The refinery is a "key supplier of transport fuels like diesel for buyers in Europe and produces smaller quantities of gasoline," per Bloomberg.
Threat level: Ships are already avoiding the Strait of Hormuz, the narrow waterway abutting Iran that handles about a fourth of the world's seaborne oil trade, for several reasons.
- Even without a physical blockade and closure, insurance rates are skyrocketing for tankers moving crude and petroleum products, analysts note.
- And there have been reports of attacks on tankers near the strait.
Catch up quick: A Reuters piece explores onshore oil and gas sites in the Middle East that have been shut down as a precaution.
- And Bloomberg explores another spillover effect of the battle: surging European natural gas prices, with the bloc at risk of the most serious energy shock since Russia invaded Ukraine.
Zoom out: The conflict was already going to shake markets even without major direct strikes on oil production, processing or export infrastructure.
- Oil analyst Ellen Wald said that if ships avoid entering the strait for weeks, it could further boost prices.
- "If we're looking at this kind of level of military activity in the Gulf for four weeks, I think we will probably have some serious problems, particularly in Asia, for availability of crude oil and oil products," she told Axios Sunday evening.
- This could bring "serious price hikes and potentially even shortages in Asian countries," she said.
What we're watching: Whether the military campaign brings new strikes on oil infrastructure from any side.
Editor's note: This story has been updated with comments from Iran's deputy foreign minister.
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