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Sept 14 (Reuters) - Yemen's Iran-aligned Houthi group onSaturday attacked two plants at the heart of Saudi Arabia's oilindustry in a strike that could impact about 5 million barrelsper day of crude production - close to half of the kingdom'soutput or 5% of global oil supply.
Following are reactions to the attack:
U.S. AMBASSADOR TO SAUDI ARABIA JOHN ABIZAID:
"The U.S. strongly condemns today's drone attacks againstoil facilities in Abqaiq and Khurais. These attacks againstcritical infrastructure endanger civilians, are unacceptable,and sooner or later will result in innocent lives being lost."
INTERNATIONAL ENERGY AGENCY, PARIS:
"The IEA is monitoring the situation in Saudi Arabiaclosely. We are in contact with Saudi authorities as well asmajor producer and consumer nations. For now, markets are wellsupplied with ample commercial stocks."
SANDY FIELDEN, ANALYST AT MORNINGSTAR:
"It takes 19-20 days to ship Ras Tanura (Saudi) toSingapore, but 54 days from Houston to Singapore. So U.S.'relief' will take time. The real issue here is how much stocksthe Saudis have to supply the market until their production isfixed.
"The obvious short-term fix would be waivers on Iransanctions, but politically that's a hard pill for the Trumpadministration to swallow. By all accounts the Iranians havetankers full of storage ready to go.
"Many countries have strategic stocks for exactly thisreason. The price (of oil) is going to jump all right, but theSaudis and U.S. have a day to run interference on theirpositions before then. The most scary result would be a Saudiescalation of the war in Yemen. Then the whole Gulf getstrigger-happy."JASON BORDOFF, FOUNDING DIRECTOR, CENTER ON GLOBAL ENERGYPOLICY, COLUMBIA UNIVERSITY, NEW YORK:
"Abqaiq is perhaps the most critical facility in the worldfor oil supply. Oil prices will jump on this attack, and if thedisruption to Saudi production is prolonged, an SPR (StrategicPetroleum Reserve) release from IEA members seems both likelyand sensible.
"This is a reminder why, despite America’s becoming anet-zero oil importer, the SPR remains a key strategic asset.Sanctioned Iran supplies are another source of potentialadditional oil, but (U.S. President Donald) Trump has alreadyshown he is willing to pursue a maximum pressure campaign evenwhen oil prices spike.
"If anything, the risk of tit-for-tat regional escalationthat pushes oil prices even higher has just gone upsignificantly. Will the Saudis feel the need to respond? Willthe Americans? I don’t know, but the point is this: Every newattack increases the risks of an unintended escalation tomilitary conflict as each side feels compelled to respond insome way to the preceding incident."
ROBERT MCNALLY, HEAD OF RAPIDAN ENERGY GROUP, BETHESDA,MARYLAND:
"Today’s attack on the Abqaiq processing facilityconstitutes a paramount oil bullish, equity bearish, and globalgrowth negative risk. Details are scarce, but early pressreports indicate some 5 million bpd of Saudi production isimpacted. The videos on Twitter suggest large-scale damage,though it is possible some of the fire is due to emergencyflaring procedures associated with the shutdown. Aramcoreportedly said it expects production to restart quickly,suggesting damage may be light. Even if that proves to be thecase, such a brazen attack by an Iranian proxy on the crownjewel of the Kingdom of Saudi Arabia’s energy system will raisethe overall geopolitical risk premium."
JAMES KRANE, MIDDLE EAST ENERGY SPECIALIST, RICE UNIVERSITY’SBAKER INSTITUTE:
"This is a pretty serious escalation of the proxy warbetween Iran and Saudi Arabia. With something like this, wemight see the U.S. get dragged in. Iran is telling us 'you needto put us on the front burner.’ They’re not going to be put outof the picture forever. With (former U.S. National SecurityAdviser John) Bolton out, who knows? It is hard to see thatBolton’s departure isn't part the calculus. Iran is stepping upwhat they see is its defense and looking for us to make the nextmove, and we’ve just fired the hardest line guy in the cabinet.
“Asian countries are more at immediate risk because they arethe big importers from Saudi Arabia, with 80% of Saudi exportsgoing to East Asia. For the United States, the main threat is inthe price of oil, it’s not in the immediate supply.
“The asymmetry of this is obvious. You have one of theworld’s largest consumers of advanced weaponry basicallydefenseless in the face of drones that cost less than $1,000 andfrom a country that is so poor and disorganized it is undergoinga cholera epidemic and widespread starvation.”JOSH YOUNG, CHIEF INVESTMENT OFFICER, BISON INTERESTS LLC:
“There has been nearly zero geopolitical risk in the oilmarket for a while now, partly because of OPEC ineffectivenessand partly because of shale production growth. This scale ofproduction disruption and potential retaliation couldreintroduce political risk and also drain inventories.
"It seems very likely that oil prices and related equitieswill rise if the multimillion-barrel-per-day productiondisruption is sustained for more than a day or two. And if itsustains beyond that, I don't think the calls for $80+ oil inthe short term are unrealistic.
"Speculative positioning in the financial markets are verylow and inventories have been rapidly declining, especially inthe past couple of months - oil prices may have risen evenwithout this disruption.”ETHAN BELLAMY, SENIOR OIL AND GAS ANALYST, R.W. BAIRD:
“Crude oil should rally, the only question is by how much.There’s ample OPEC producer spare capacity to absorb what lookslike a temporary glitch. A good analogy could be the drop inspot crude oil when John Bolton got fired, which removed aperceived geopolitical risk premium.
"An acceleration of asymmetrical attacks and their successcould add back this risk premium. The attack should highlightthe relative resilience of U.S. production: a diversified,distributed network of producers and assets in a highly stableregion as opposed to a highly concentrated and besieged supplyin the Kingdom.
"We could see modest outperformance for U.S. energyproducers and logistics companies when stock exchanges open onMonday morning.”JAMES WEST, SENIOR MANAGING DIRECTOR, OILFIELD SERVICES ANALYST,EVERCORE ISI:
“This highlights the continued geopolitical tensions in theMiddle East and should push oil prices higher. For servicecompanies there shouldn't be any impact.”SARAH LADISLAW, SENIOR FELLOW, ENERGY AND NATIONAL SECURITY,CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES:
"Right now it's hard to tell the true severity of the damagebecause emergency procedures to shut down and flare can makethings look or seem worse than they are. Nevertheless, thevulnerability of Saudi oil infrastructure, as well as tankers inthe region, has been becoming more apparent and underappreciated in markets.
"This - should - elicit a pretty high level of attention andcould break one of two ways: the beginning of a dangerousescalatory cycle or the trigger for more direct diplomaticengagement. I find it hard to believe that the U.S. would waiveIranian sanctions in response to the attack - unless they werelooking for a reason to do so and get the Iranians to thenegotiating table. But I suspect they would view that asstarting negotiations from a position of weakness. On exacttrade flow impacts, we’ve not figured that out yet and itdepends again on volumes, product impacts and forward storedstocks."MATT JOHNSON, CO-FOUNDER, PRIMARY VISION
"In the near term, not much should change for U.S. oilproducers with exhausted (capital spending) budgets. However, weexpect traders to be racing to rethink their hedgingstrategies."
(Reporting By David Gaffen in New York, Liz Hampton in Denverand Gary McWilliams in HoustonEditing by Chizu Nomiyama and Marguerita Choy)