Oil prices increased sharply on Tuesday morning after reports emerged that two pipeline stations in Saudi Arabia had suffered drone attacks.
According to the state-owned news agency SPA, the incident has been labeled an “act of terrorism.” The outlet quotes Saudi Energy Minister Khalid al-Falih as saying that the attacks, carried using drones at two oil stations near Riyadh, were not only acts of terrorism that target the Kingdom, but were a threat to world oil supplies.
In the aftermath of the news, Brent crude futures rose 1.3% and jumped 90 cents to trade at $71.14 per barrel. In the morning also, U.S. West Texas Intermediate (WTI) crude futures stood at $61.67 a barrel, climbing by 1.03%.
SPA announced that the attacks damaged Saudi Arabia’s East-West pipeline pumping stations, but the resultant fires have since been contained.
The news agency also quoted Al-Falih as noting that the attacks did not interrupt oil production, while Saudi Aramco, the state oil company, also moved to clarify that the attacks have not impacted Europe-bound supplies of oil and gas.
By press time, Saudi authorities had not accused anyone directly. However, a Houthi-controlled TV channel did announce in the morning that the Yemeni militia outfit had carried out multiple drone attacks targeting a number of Saudi installations.
According to the Houthi-run Masirah TV, one military official had reportedly confirmed that they had used up to seven drones to carry out the attacks, on what he called “vital Saudi installations.”
The Tadawul, Saudi’s main stock index, has lost 1.5% by midday after having dropped 2.7% on Monday following reports that a sabotage attack had also targeted two Saudi oil tankers.
The week sees a flare-up of tensions in the region, with Sunday’s attacks being linked to Iran or the Houthis. Attacks in the oil-rich region are also likely to see an extended conflict erupt further destabilizing the oil sector.
Analysts have pointed out that any escalation of the matter into a full-blown conflict could spell danger for the Strait of Hormuz. The strait is a vital oil artery, accounting for nearly 30% of seaborne oil.