Nation/World

Saudi attack shows fragility of oil market

A suicide bomb attack at a huge Saudi Arabian petroleum facility rattled world energy markets Friday, sending crude prices soaring more than $2 a barrel in New York as it underscored the fragility of world oil supplies.

The massive Abqaiq processing plant was undamaged when at least two cars exploded outside its gates, Saudi officials said. Although operations weren’t interrupted, the assault on the world’s largest oil producer exacerbated the ever-present fear that the flow of oil could fall short of the globe’s voracious appetite.

Al-Qaida purportedly claimed responsibility for the attack, the first on an oil facility in Saudi Arabia. The assault raised speculation that the militants were adopting the tactics of insurgents across the border in Iraq, where the oil industry has been repeatedly targeted.

The concerns were heightened because the targeted plant is vital to Saudi oil operations, handling about two-thirds of the kingdom’s output of 9.5 million barrels a day and 7 percent of the world’s supply. Without the vast Abqaiq facility, about 25 miles inland from the Persian Gulf coast, the nation’s ability to export oil would be crippled.

“This is a major-league deal,” said Matthew Simmons, an oil-industry consultant who has written a book about Saudi Arabia’s role in the world petroleum market. “This shows that the terrorists are acutely aware of where you want to go for the jugular vein.”

Oil had grown cheaper recently, slipping below $60 a barrel last week for the first time this year as U.S. inventories swelled.

But unrest in Nigeria and other hot spots pushed prices higher this week, capped by Friday’s thwarted attack. In New York futures trading, U.S. benchmark light, sweet crude briefly jumped above $63 a barrel before settling at $62.91, up $2.37.

The day’s increase, equal to 3.9 percent, was the largest percentage hike since the markets cowered on Sept. 19 as Hurricane Rita threatened the U.S. Gulf Coast, a major oil production and refining center.

Within the vast, sprawling infrastructure of oil production, it would be difficult to find a target more vital to the global marketplace. Saudi Arabia supplies 11 percent of world oil consumption and is the third-largest exporter to the United States, after Canada and Mexico. At Abqaiq each day, the equivalent of 6 million barrels is stripped of hydrogen sulfide and water and prepared for export.

“If there had been a hit … oil would be north of $80,” said Stephen Leeb, president of Leeb Capital Management in New York. “With the wink of an eye, you can turn what is a razor-thin surplus in the oil market into a dramatic deficit,” said Leeb, author of a book titled “The Coming Economic Collapse: How You Can Thrive When Oil Costs $200 a Barrel.”

Even though current U.S. inventories of oil are well above year-ago levels, oil traders fret about any sign that oil production may be interrupted, especially when it happens in Saudi Arabia, the home of a quarter of global reserves.

Saudi Arabia has seen terrorist attacks before, including two deadly assaults on oil company offices and employee housing in 2004.

But Friday’s strike at the complex in eastern Saudi Arabia was the first to come so close to a key facility, analysts said.

The attack was thwarted when guards fired on the suicide bombers’ cars, causing the vehicles to explode. At least two militants died, and Saudi television reported that two security guards were killed.

Saudi Oil Minister Ali Ibrahim Naimi said Abqaiq’s operations and exports “continued to operate normally.”

Al-Qaida claimed responsibility on a Web site often used by Islamic militant groups.

Saudi Arabia has been waging a successful three-year crackdown on al-Qaida’s branch in the kingdom. Security forces have killed or captured most of the branch’s known top leaders, most recently in gunbattles in December, after the militants launched a campaign in 2003 to overthrow the U.S.-allied royal family with a string of attacks.

There have long been fears militants would target oil facilities, but in the past they have targeted foreigners working in the industry rather than infrastructure.

“In Iraq they zeroed in on oil, and this appears to be a creeping process, since it is happening in Saudi Arabia,” said Youssef Ibrahim, a Dubai-based political risk analyst with the Strategic Energy Investment Group.

Saudi Aramco, owner of the Abqaiq complex, said in 2004 that it had strengthened security at many oil facilities by adding electrified fences with barbed wire, surveillance cameras, bomb-sniffing dogs, helicopter patrols and thousands of guards. Abqaiq is surrounded by three fences; the attackers failed to breach the outermost barrier.



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