Dubai — Saudi Arabia is directly pointing the finger at long-standing geopolitical rival Iran for this week's attacks on a pipeline, escalating a war of words that threatens vital oil and natural gas exports from the world's primary producing region.
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In a letter to the UN Security Council, Saudi Arabia said Iran and the Houthi rebels in Yemen that it has backed were responsible for a drone attack Tuesday on the country's East-West Pipeline that caused it to be shut down, Saudi-owned Al Arabiya channel reported Wednesday.
Saudi Arabia and the UAE also filed a complaint to the council over the suspected sabotage of four tankers Sunday near Fujairah, Arab media reported. Two of the vessels were Saudi-owned, one was UAE-flagged and the other Norwegian-flagged.
The incidents have not impacted Saudi and UAE oil production or exports, according to officials. But the countries are on high alert for further attacks on key infrastructure, with the UAE saying it was beefing up maritime security as a precautionary measure.
The Houthi-aligned Yemen News Agency quoted a statement from the General Command of the Armed Forces as saying it had "the ability to carry out broader and larger operations," adding it had received support from collaborators in Saudi Arabia.
Oil prices have had a relatively muted reaction to the week's events, but analysts say the market should remain wary. Front-month Brent futures on Wednesday were trading below Tuesday's close until a weekly US oil inventories report from the Energy Information Administration released at 1430 GMT sent prices higher.
"Hawkish rhetoric and actions from both sides reduce the margin for error to avoid a potentially outsized oil-market event," said Paul Sheldon, head of geopolitical analysis for S&P Global Platts Analytics.
For now, oil flows in the region are continuing as normal, market sources said.
An official at a company active in the port of Fujairah said he was not aware of any increased security measures.
"We were really surprised when we heard about the attack [on the ships offshore Fujairah], because everything has been so completely calm at the port and there have been no changes," the official said, speaking on the condition of anonymity.
Another shipping source said vessels were continuing to pick up cargoes up and down the Persian Gulf and transiting through the Strait of Hormuz.
"Owners will be more vigilant, but [the attacks seem] to be targeting specifically Saudi [infrastructure] at the moment," said the source, who likewise asked not to be named.
State-owned Saudi Aramco's 1,200-km (744-mile) East-West Pipeline was temporarily shut as a precautionary measure Tuesday following the drone attack that caused a fire at a pumping station, as the company works on restoring operations.
Aramco could not be reached for comment Wednesday for an update on repair work.
The pipeline, which can carry up to 5 million b/d, transports crude from Saudi Arabia's oil-rich eastern region to the Red Sea port city of Yanbu.
Both Saudi energy minister Khalid al-Falih and Aramco said on Tuesday that exports and supplies were normal after the attack.
Saudi Arabia ships about 10% of its total crude exports to Europe through the line to the Red Sea. The line is also critical to Saudi Arabia's own Red Sea refineries, which are mainly supplied with crude produced in its eastern region and shipped from the Persian Gulf.
"The East-West Pipeline is an incredibly important asset given the current climate, as it is practically the only means of getting oil out of the Persian Gulf that currently has any spare capacity other than the Strait of Hormuz," said James Davis, director of short-term global oil service at consultancy FGE.
The Strait of Hormuz is a critical oil chokepoint through which some 18.5 million b/d transits, according to EIA data, and Iranian officials have threatened to disrupt maritime traffic through it, in the wake of the US' decision to withdraw from the nuclear deal that had relaxed sanctions on Iran's oil exports.
Saudi Arabia pumped 9.82 million b/d in April, the lowest in over four years and well below its quota under an OPEC/non-OPEC cuts accord, according to the latest S&P Global Platts survey.
The US has urged Saudi Arabia to compensate for any loss of Iranian crude supplies, after the Trump administration declined to renew sanctions waivers that expired earlier this month, drawing condemnation from Iran.
Saudi Arabia on May 19 will host a meeting of the nine-country OPEC/non-OPEC monitoring committee meeting in Jeddah.
"The attacks of the last few days reduce ... the concept of spare supply capacity rapidly available in case of a showdown between the US and Iran," said Olivier Jakob, an analyst with the consultancy Petromatrix.
-- Dania Saadi, dania.el.saadi@spglobal
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