Saudi Arabia flags supply risks after Houthi attacks

Saudi Arabia has turned the heat up on the international community for what it sees as inaction in the face of attacks on its energy infrastructure by the Houthi rebel group in neighboring Yemen, saying it takes no responsibility for any resulting supply outages.

In the past 10 days the Houthis have targeted several energy facilities in Saudi Arabia, many of which are operated by state-controlled Aramco, with drones and missiles.

"The kingdom of Saudi Arabia declares that it will not incur any responsibility for any shortage in oil supplies to global markets in light of the attacks on its oil facilities from the Iran-backed Houthi militias," Saudi state news agency SPA reported, citing the foreign ministry.

With much of the world's effective spare oil production capacity in the hands of only Saudi Arabia and the UAE, the former is implicitly warning of a supply risk should there be an incident as serious as the September 2019 missile attacks on Aramco's 7mn b/d Abqaiq crude processing plant and 1.2mn b/d Khurais field, which briefly took out nearly 6mn b/d of crude capacity.

The limited global spare capacity, along with the situation in Ukraine, has contributed to oil prices holding above $100/bl for much of the past month. Front-month Ice Brent futures are around $114/bl today, up by nearly $6/bl from yesterday's close.

"Iran's continued behavior of equipping the terrorist Houthi militias with the technology of ballistic missiles, and advanced UAVs [unmanned aerial vehicles] with which they target the kingdom's oil, gas and refined products production sites, resulting in serious consequences for upstream and downstream sectors affecting the kingdom's production capability and its ability to fulfil its commitments," the foreign ministry said.

This will "undermine, without a doubt, the security and sustainability of energy supplies to global markets," it said, calling on other countries to "stand firm" against attacks that "represent a direct threat to the security of oil supplies".

The 126,000 b/d Riyadh refinery was among several facilities targeted on 11 March by nine drones, resulting in a small fire. Yesterday spate of ballistic missile and drone strikes hit Aramco facilities in a number of cities, sparking a fire at a Jeddah oil storage facility and leading to a temporary drop in run rates at the 400,000 b/d Yasref refinery in Yanbu.

The Houthis also yesterday targeted the city of Jizan, home to an Aramco-operated 400,000 b/d refinery complex that is being commissioned, an Aramco-operated LPG facility in Yanbu, an electricity transmission station in Dhahran al-Janub and an LPG facility operated by the country's largest distributor, state-owned Gasco, in the southwestern city of Khamis Mushait.

The latest attacks drew condemnation from the US, which has since labeled them as "terrorist acts" and called for a swift end to hostilities.

"It is time to bring this war to a close," the White House said yesterday. "We will continue to full support our partners in the defence of their territory from Houthi attacks. We call on the international community to do the same."

By Nader Itayim