Satellite Shots of Smoke at Saudi Oil Sites Keep Traders on Edge

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(Bloomberg) — Oil traders pored over satellite images that showed smoke appearing at several Saudi oil facilities over the past 48 hours, but the data offered few clues as to whether the kingdom’s energy production had been impacted by recent attacks from Iran-backed militias. 

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Images from the European Union’s Sentinel-2 Earth observation satellite showed flaring at the Abqaiq oil processing plant, a vital element in Saudi oil exports that can process about 7 million barrels daily. The site was attacked by the Houthis in 2019, cutting the nation’s oil production in half.

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Abqaiq hasn’t flared in any other images from the satellite so far this month, but has on some previous occasions when Saudi energy infrastructure was targeted during the war. The facility is the starting point for the East-West pipeline that has provided a vital route to move Saudi crude to the Red Sea, bypassing the Strait of Hormuz.

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Flaring towers help processing plants burn off excess gas and act as crucial safety valves for industrial sites. On its own, such an event doesn’t necessarily indicate the facility has been hit or damaged.

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There also appeared to be flaring at the Hawiyah gas processing plant, which sits on the Ghawar oil field, one of the world’s largest.

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Yemen’s Houthi rebels said they targeted Saudi oil facilities with missiles and drones over the weekend. The militants, backed by Iran, said they tried to hit the crucial western export terminal of Yanbu, and a giant refinery at Jazan, also on the west coast. Saudi Arabia said on Monday that it had intercepted a number of drones fired from Iraqi territory by Iran-backed groups, but has yet to comment on the impact of the attacks.

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Saudi Aramco and Saudi Arabia’s energy ministry didn’t answer requests for comment. 

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Traders said the images don’t clarify whether the kingdom’s operations had been disrupted, but added that the market could ill afford to lose more barrels after Brent crude briefly spiked back above $100 last week. Global oil supplies have been severely disrupted by the Iran war, which has made flows through the Strait of Hormuz more intermittent, and the Houthis recently added to the risks by saying they would begin blockading Saudi Arabia.

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The images at Abqaiq also showed heavy moisture at one of the giant spheroids, which are key to separating gas and oil at the plant. It’s unclear why that area appeared to have particularly high moisture content.

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At Jazan, Sentinel-2 images showed a fire at one tank and a flare tower to the east of the site also releasing smoke. It wasn’t clear if the incidents affected operations at the site, but the image suggests that any visible impact is concentrated near storage tanks. It’s also not clear if any of the tanks to the south of the site were affected as they are obscured by smoke. 

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