Saturday, February 25, 2006

Saudi Blast: What Took You So Long?

Oil has climbed 4% on news of a blast on a big oil refinery in Saudi Arabia. Don't misinterpret the title of this post as being smug, or a possible endorsement of the attack. It's not. It has simply been an obvious tactic and one wonders why it hasn't been attempted more often. It's possible that Saudi/Muslim attacks on Saudi/Muslim oil is truly an act of sabotage, futility, more so than a suicide bombing can be. Desperation is a dangerous thing, and we now appear to be in that zone where the world's attention is so focussed on Saudi oil, that the enemy of your enemy is not your friend, and the friend of your friend, is not your friend either. Now it's winner take all, and the losers are trying to spoil the prize.

The prize is this precious resource that is no longer meeting global demand. This makes it an even more precious and valuable resource, and the stakes can only get higher, along with everything else: prices, risks, rewards.

Oil prices spike on Saudi attack

By Margaret Orgill
LONDON (Reuters) - Oil jumped more than $2 on Friday after news of a suicide bomb attack at the huge Abqaiq oil facility in Saudi Arabia, which triggered worries about supply from the world's top crude producer.

At least two cars exploded at the gates of the Abqaiq site when security forces fired on suicide bombers trying to storm the facility in the country's eastern province.

"It's all about perception. Just the idea of an attack in Saudi Arabia is enough to make the market jumpy," said Glenn Murray, an oil broker at GM Oil.

Saudi Oil Minister Ali al-Naimi described the raid as a "terrorist attempt" but said oil exports had been unaffected. He said a limited fire at the site was being brought under control.

"This incident had no impact on oil and gas production in the kingdom," Naimi said in a statement carried by the official Saudi Press Agency. "The plant continued production at full levels and export operations are as usual."

Most Saudi oil is exported from the Gulf via Abqaiq which handles about two thirds of the country's output.

"This just emphasizes fears over global oil supply security when we're already facing major ongoing risks in Nigeria, Iran and Iraq," said Gary Ross, CEO at PIRA Energy consultancy in New York.

U.S crude prices settled up $2.37 to $62.91 a barrel after hitting a high of $63.25. London Brent was up $2.06 at $62.60.

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