Oil prices climbed on Tuesday after Saudi Arabia reported “armed drones” attacked two pumping stations in the kingdom, underscoring rising tensions in the Middle East.
US oil prices rose 1.4% even though Saudi Aramco told CNN that the attack caused “no damage to oil production, no oil spills or injuries.” Brent crude, the global benchmark, jumped 1.6%.
The Saudi Energy Ministry told the kingdom’s state-run press agency that the attack caused a fire that has since been contained.
The apparent drone attack comes just a day after Saudi Arabia said two of its oil tankers were sabotaged off the coast of the United Arab Emirates.
Normally such threats to the Middle East’s oil supplies would have a more pronounced impact to oil prices. But the gains have been muted by global fears about the deepening US-China trade war.
The Dow plunged 617 points, or 2.4%, on Monday after China retaliated against tariffs that the United States announced last week. The escalating trade war threatens to slow the global economy, eating into demand for crude oil.
Tensions have been rising in the Middle East, in large part because of intensifying rhetoric between the United States and Iran.
Saudi Aramco, the kingdom’s state-owned oil company, told CNN that the drone attack targeted two pumping stations located between Riyadh in the east and Yanbu in the west. Only one of the pumping stations suffered “minor damage,” Aramco said.
Attacks on oil infrastructure happen occasionally and the impact tends to be brief so long as supply is not impacted.
On Monday, the UAE described a “sabotage attack” against tankers. There were no injuries in that apparent attack and officials did not specify the nature of the incident nor who they believed carried it out.
Last week, the United States announced the deployment of the USS Abraham Lincoln aircraft carrier to the Middle East due to threats from Iran and its proxies.
David Petraeus, formerly America’s top general in the Middle East, told CNN Business last week that he’s concerned about the United States “inadvertently ending up in some kind of clash” with militias trained and funded by Iran.
“That could escalate and get out of hand,” Petraeus said. (CNN)