Dubai — Attacks on four oil tankers that appeared to cause significant damage near the geopolitically sensitive Strait of Hormuz in the Persian Gulf had the oil market on edge Monday.
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Saudi Arabia said two of its oil tankers were victims of a "sabotage attack" on Sunday off the coast of eastern UAE port of Fujairah, while market sources identified the other vessels as UAE-flagged and Norway-flagged.
The incidents resulted in no injuries nor chemical spills but were being treated as a "serious development," the UAE foreign affairs ministry said.
Saudi and Emirati officials did not identify any suspects or source of the attacks, but warned that further provocation could threaten maritime traffic and oil trade in the region.
US Secretary of State Mike Pompeo skipped a planned visit to Moscow Monday to visit Brussels in an unplanned visit with his European counterparts over mounting tensions in the region.
"The US and Iran have become entangled in a dangerous bout of threats and taunts that could potentially escalate into a military conflict," John Driscoll, a former oil trader who heads the JTD Energy consultancy in Singapore, told S&P Global Platts. "The temperature is rising with the resumption of Iran's nuclear program."
Front-month Brent futures traded as high as $72.58/b on Monday, up 2.5% from the previous close, before tumbling later in the day.
The US' decision this month to tighten its sanctions enforcement on Iran's oil exports has ratcheted up tensions in the Middle East, with the White House declaring it has received assurances from Saudi Arabia and the UAE to fill any supply gap.
Iranian officials have issued veiled threats to close or disrupt traffic through the Strait of Hormuz, a critical chokepoint through which 30% of the world's seaborne oil transits, prompting the US to deploy warships and bomber aircraft to the region.
Fujairah is one of the world's biggest bunkering hubs and lies just outside of the Strait of Hormuz, giving it a strategic location for oil trading. The UAE has a pipeline that it could divert crude to Fujairah in the event that the strait is blocked. The Habshan pipeline has a capacity of 1.5 million b/d, around half of the UAE's total crude production.
But Sara Vakhshouri, who heads the SVB Energy International consultancy in Washington, said Sunday's incident "increases the vulnerability of the alternative route to the Strait of Hormuz."
Army helicopters were monitoring the area Monday morning, a Fujairah port source said. UAE officials said Monday operations at the port were normal.
The US Department of Energy is aware of the attacks and, in monitoring the oil markets, "is confident they remain well-supplied," Press Secretary Shaylyn Hynes said in a statement.
If the incident is isolated, the market is likely to remain calm at this time of the year when global refining maintenance is reaching peak levels in May," said Kang Wu, Platts Analytics' head of Asia analytics. "As the driving season arrives, similar disruptions on a prolonged basis will have a much bigger impact down the road."
HOLES IN THE HULLS
The two struck Saudi tankers were on their way to pass through the Strait of Hormuz into the Persian Gulf, Saudi energy minister Khalid al-Falih said, according to a report by the Saudi Press Agency. One of them was scheduled to load with Saudi crude from the port of Ras Tanura for delivery to Saudi Aramco's customers in the US, the report stated.
"The Saudi minister of energy denounced this attack that aims to undermine the freedom of maritime navigation, and the security of oil supplies to consumers all over the world," SPA reported.
Industry sources and later Saudi media identified the two vessels as the Al-Marzoqah and the Amjad.
The other ships attacked were the Norway-flagged Andrea Victory and the UAE-flagged A.Michel, sources said, with photos posted on social media showing their damage.
All four tankers were observed as of Monday afternoon in the anchorage and ship-to-ship transfer area outside the Fujairah terminal, according to Platts trade flow service cFlow.
The Andrea Victory's operator, Thome Group, confirmed Monday that the vessel "sustained hull damage after being struck by an unknown object", adding that the ship is not in danger of sinking.
OPEC TALKS LOOM
The incident comes a week before Saudi Arabia is set to host a closely watched meeting of a nine-country OPEC/non-OPEC market monitoring committee Sunday in Jeddah. The committee, which Falih co-chairs with Russian counterpart Alexander Novak, is expected to discuss the impact of the US sanctions on Iran to global supply balances, with many members of the coalition eager to produce beyond their agreed quotas.
Iran does not sit on the committee but has denounced in advance any attempts to take its sanctions-impaired market share.
Platts Analytics forecasts that Iranian crude exports could drop to below 500,000 b/d by the second half of this year, from about 1.3 million b/d in recent months, now that the US has allowed sanctions waivers to eight importers of Iranian oil to expire on May 2.
Falih has said he sees no immediate shortage in the oil market but that Saudi Arabia would respond to any customer needs if asked for more crude.
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