Oil company Saudi Aramco has told Indian refiners there will be no shortage in supplies after drone attacks at two major plants in Saudi Arabia on Saturday, PTI reported on Monday, quoting the Indian oil ministry. The drone strikes by Yemeni Houthi rebels crippled half of the supplies of the world’s largest oil exporter and disrupted almost 5% of global supplies.
The oil ministry said it was closely monitoring the situation and was in talks with Indian refiners and Saudi Aramco after global oil prices surged to record highs, Bloomberg reported. Saudi Arabia is India’s top oil supplier after Iraq, and supplied 7,88,200 barrels of oil per day to India between January and July, Reuters reported.
“Following the attacks on the oil stabilisation centres of Saudi Aramco, top executives of Aramco have been contacted,” said Petroleum Minister Dharmendra Pradhan, according to NDTV. “Indian ambassador in Riyadh contacted the senior management of Aramco to ensure steady supply to India.”
London’s Brent futures jumped $12 a barrel after the markets opened, marking the highest jump in terms of US dollars since their launch in 1988. Since that initial gain of almost 20%, prices have come down about half. According to The Financial Times, the rally in oil price picked up after early morning trading began in New York.
Crude oil prices pared their gains after United States President Donald Trump authorised the release of US oil reserves. However, it will take months for the Saudi oil supplies to get back to normal. According to Reuters, top Aramco officials have said a full return to normal production “may take months”.
Trump said the US would not be affected and would help its allies tide over the crisis. “Because we have done so well with energy over the last few years (thank you, Mr President!), we are a net energy exporter, and now the number one energy producer in the world,” he tweeted. “We don’t need middle eastern oil and gas, and in fact have very few tankers there, but will help our allies!”
Though Russia has not talked about ramping up crude oil production, analysts at Citigroup believe the country might do so within days or weeks to make up for the falling Saudi production, according to The Financial Times. “If Saudi crude production outages last more than a week or two, we think Russian oil production may be allowed to rise to act as a partial offset,” the analysts said in a note.
This crisis is a bigger disruption than August 1990, when Saddam Hussein invaded Kuwait, leading to the loss of Kuwaiti and Iraqi petroleum. It has even exceeded the loss of Iranian oil production in 1979 during the Islamic Revolution, said the International Energy Agency.
The United States has blamed Iran for staging the attacks on the Saudi oil plants. Iran, which has denied the allegation, is backing the Houthis in the Yemeni civil war against an international coalition led by Saudi Arabia.
“Saudi Arabia oil supply was attacked,” Trump tweeted on Sunday. “There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!” Secretary of State Mike Pompeo has also warned Iran of a retaliation for the attacks.
Russia said the threats issued by the United States were unacceptable, and warned it not to use the incident to exacerbate tensions with Iran, The Financial Times reported.
“We consider it counterproductive to use what happened to foment tensions against Iran in line with the well-known US approach,” the foreign ministry said in a statement. “And all the more unacceptable are options that provide for steps of retaliatory force, which are allegedly being discussed at present in Washington.”
South Korea, meanwhile, said it would consider releasing its strategic oil reserves if the crisis drags on, Reuters reported. The East Asian country is the world’s fifth-largest crude oil importer, and has about 96 million barrels of crude oil and refined products as strategic stockpiles at present.