By Barani Krishnan
Investing.com - Oil prices ramped up on Thursday as Saudi Arabia tapped Iraq and others to ensure there’s no default in its fuel delivery to customers. That came just days after the kingdom declared little fallout from an attack on its energy infrastructure.
U.S. West Texas Intermediate crude was up 55 cents, or 1%, at $58.59 per barrel by 12:51 PM ET (16:51 GMT). It slumped 2% on Wednesday on the notion that Saudi Arabia would not be stretched in meeting customer obligations, particularly after it said half of the production lost from the weekend attacks had been restored and the balance would be back by November.
U.K. Brent crude rose $1.15, or 1.8%, to $64.75.
The Saudi state-owned Aramco Trading Co purchased diesel cargoes and also sought one-off supplies of aviation fuel this week, Bloomberg reported. Platts, meanwhile, said Riyadh had approached Iraq's State Oil Marketing Organization to buy Iraqi crude and that SOMO had not agreed yet to "comply".
“These plans suggest Saudi Arabia will have no spare capacity for at least the next two-and-a-half months and therefore no way to absorb any further shocks,” consultancy Energy Aspects said in a note.
Until last week, Saudi Arabia was not only the world’s No. 1 crude exporter, but also its most reliable source of spare crude supply in the event of any global emergency. Over more than four decades it has built up an unshakable reputation for being able to deliver contracted oil cargoes in any situation, even war.
Thursday’s rally in oil was also driven by saber-rattling by Iran, the United States and Saudi over responsibility for the attack and the likely response.
Yemen-based Houthi rebels say they carried out Saturday’s drone-based attack on the Abqaiq crude processing complex and Khurais oilfield that initially knocked out 5.7 million barrels of Saudi output, accounting for 5% of daily world oil supply. But U.S. Secretary of State Mike Pompeo and officials in Riyadh said evidence showed the weapons used were fired from southwest Iran instead.
Pompeo, visiting Saudi Arabia on Wednesday, said the attack constituted an "an act of war".
Iranian Foreign Minister Javad Zarif said Pompeo’s remarks may be aimed at deceiving President Donald Trump into going to war against Tehran. Trump has already said he had no wish to engage in a military battle with Iran, although he said earlier this week that Washington was “locked and loaded” to respond,
The Washington Post, in a report on Tuesday, interpreted the president’s remarks as meaning that the United States would support Saudi Arabia with intelligence, targeting information and surveillance capabilities to strike back at Iran, though the U.S. itself would not fire any weapon.
Zarif told CNN that the Iranian response to a U.S. or Saudi military strike on the Islamic Republic would be "all-out war".
“’Act of war’ or AGITATION for WAR? Remnants of #B_Team (+ambitious allies) try to deceive @realdonaldtrump into war. For their own sake, they should pray that they won't get what they seek. They're still paying for much smaller #Yemen war they were too arrogant to end 4yrs ago,” Zarif tweeted.