Iran-backed drone attacks damage Saudi pumping stations

By Anthony DiPaola and Dana Khraiche on 5/14/2019

DUBAI AND BEIRUT (Bloomberg) -- Saudi Arabia halted its main cross-country oil pipeline after a drone attack damaged pumping stations along the link, a strike claimed by Iran-backed rebels in neighboring Yemeni. Oil prices rose.

Saudi Aramco, the world’s biggest oil exporter, said that supplies of crude and products continued “normally without interruption,” the official Saudi Press Agency reported, citing the energy ministry.

The state producer halted the pipeline transporting oil from eastern fields to the port of Yanbu on the western coast as a precautionary, temporary measure after armed drones attacked two pumping stations, igniting a fire that caused minor damage to one, according to SPA. Saudi stocks reversed gains, with the benchmark Tadawul All Share Index trading 0.2% down in Riyadh.

The attack comes amid rising tensions in the Persian Gulf region as the U.S. increases pressure on Iran, the regional rival of Saudi Arabia and the United Arab Emirates. On Monday, Saudi Arabia said two of its oil tankers were among several vessels attacked off the UAE coast near the Strait of Hormuz, the world’s most important chokepoint for oil shipments.

Neither Saudi Arabia nor the UAE. said exactly what happened to the tankers, and neither country identified potential culprits. However, the manager of one of the tankers that was hit said it suffered hole in its hull after an unknown object struck it off the UAE coast.

“This act of terrorism and sabotage in addition to recent acts in the Arabian Gulf do not only target the kingdom but also the security of world oil supplies and the global economy,” Saudi Energy Minister Khalid Al-Falih said in a statement. “These attacks prove again that it is important for us to face terrorist entities, including the Houthi militias in Yemen that are backed by Iran.”

Iranian-backed Houthi rebels in Yemen said earlier on Tuesday that they had targeted key Saudi installations using seven drones, according to the rebel-controlled Saba news agency. No injuries or fatalities were reported in the attack, according to an emailed statement from Saudi Aramco.

The East-West pipeline spans 1,200 km (746 mi) from Dhahran on Saudi Arabia’s Gulf coast to Yanbu on the Red Sea, allowing oil shipments from the kingdom to bypass the Strait of Hormuz. The pipeline can transport 5 MMbpd across the country for use in its own refineries and for export from the port of Yanbu. Aramco is working to expand the pipeline’s capacity to 6.5 MMbopd by 2023, according to a bond prospectus.

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