Saudi Says Attacks on Oil Assets Hit Output and Exports

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(Bloomberg) — Saudi Arabia said a series of attacks on its critical energy infrastructure disrupted oil and gas production and hit supply to global markets that are already reeling from the Iran war. 

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Production, transportation, refining, petrochemicals and power generation were “recently” targeted in Riyadh, the Eastern Province and Yanbu Industrial City, the state-run Saudi Press Agency said Thursday, citing an energy ministry official. The attacks included a pumping station on the East-West pipeline, the main means of getting the nation’s crude to the world during the Iran war.

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Global markets and economies have been upended by the energy shock caused by Iran’s effective closure of the Strait of Hormuz, the chokepoint at the mouth of the Persian Gulf. To work around the problem, Saudi Arabia is directing millions of barrels along the pipeline to the Red Sea port of Yanbu.

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Saudi Arabia and neighboring countries have already been forced to cut output because the Hormuz blockage means they can’t export as many barrels as they normally would by sea. 

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The attacks slashed more than 600,000 barrels a day of oil output capacity and 700,000 a day in flows on the East-West line. The conduit was moving about 7 million a day before the incident, of which 5 million were going for export. 

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The SPA report did not specify when the attacks took place beyond recently. A ceasefire between the US and Iran was announced on April 7 US time, or early April 8 in the Middle East. It also didn’t say that Iran was behind the strikes.

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The attack on the pumping station took place on April 8, a person with knowledge of the matter said at the time. TotalEnergies SE, which has a share of the Satorp refinery, said the plant had to halt output after it came under attack on April 7-8.

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Saudi authorities already reported numerous danger alerts on areas including the oil-rich Eastern Province along the Gulf coast early April 8. 

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The war means that markets face a daily shortfall of more then 10 million barrels, equal to roughly a tenth of global demand, due to the blockage, and any disruption through the East-West line could add to that. 

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Brent crude has surged more than 30% since the war commenced Feb. 28 and is trading near $99 a barrel. 

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The extent of damage to facilities is a key issue that traders, consumers and governments are watching because it will shape into how long it will take to restore supplies once the war ends. 

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The Saudi statement “puts the damage in concrete terms and shifts the narrative from episodic disruption to a measurable supply shock,” analysts at JPMorgan Chase & Co. said in a note.

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That attack “is particularly consequential, as the pipeline remains a critical bypass for” Aramco’s remaining export volumes, the JPMorgan analysts including Natasha Kaneva said in the note. The reduction in production capacity is equivalent to almost one out of every 10 barrels of pre-war Saudi crude exports.