James Hyerczyk
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Crude Oil

Crude oil futures are expected to open $5 to $10 per barrel higher Sunday evening and gasoline about 12 to 25 cents per gallon higher after Saudi Arabia shut down half of its oil production after a series of drone strikes hit the world’s largest oil processing facility in an attack by Yemen’s Houthi rebels.

Brent crude futures settled last week at $60.25 per barrel, down 1.8% for the week, its first decrease in five weeks. U.S. West Texas Intermediate (WTI) crude futures finished the week at $54.85, for a 2.7% loss for the week, its first decrease in three weeks.

Latest Facts

CNBC is reporting that according to Saudi Aramco, the closure is expected to impact almost 5.7 million barrels of crude production a day, about 5% of the world’s daily oil production. A U.S. Energy Information Administration report in August showed that Saudi Arabia produced 9.85 million barrels per day.

Saudi Energy Minister Abdulaziz bin Salman said the attacks also led to a halt in gas production that will reduce the supply of ethane and natural gas liquids by 50%.

Saudi Aramco President and CEO Amin Nasser said nobody was hurt in the attacks and emergency crews have contained the fires and brought the situation under control.

“Work is underway to restore production and a progress update will be provided in around 48 hours,” Nasser said.

According to Reuters, Saudi Arabia has yet to comment on the extent of damage on its oil production but industry sources have said some 5-6 million barrels per day (bpd) or 5-6% of global supply have been affected.


Yemen Claims Responsibility

The Khurais oilfield operated by Saudi Aramco, the state-owned oil giant, and the Abqaiq oil processing facility were attacked by a number of drones on Saturday. Abqaiq is a major facility, crucial for global energy supplies. Yemen’s Houthi rebels are claiming responsibility for the attack.

“We promise the Saudi regime that our future operations will expand and be more painful as long as its aggression and siege continue,” a Houthi spokesman said. The attack deployed 10 drones, the Houthis said.

However, U.S. Blames Iran for Attacks

“Tehran is behind nearly 100 attacks on Saudi Arabia while Rouhani and Zarif pretend to engage in diplomacy,” Pompeo wrote on Twitter. “Amid all the calls for de-escalation, Iran has now launched an unprecedented attack on the world’s energy supply. There is no evidence the attacks came from Yemen.”

US Offers Support for Saudi Arabia’s Defense

CNBC reported that the White House said President Donald Trump spoke with Crown Prince Mohammad bin Salman to offer U.S. support for Saudi Arabia’s defense.

“Violent actions against civilian areas and infrastructure vital to the global economy only deepen conflict and mistrust. The United States Government is monitoring the situation and remains committed to ensuring global oil markets are stable and well supplied,” the White House said.

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