Oil prices jolt higher after Saudi bomb attack
Oil prices jolt higher after Saudi bomb attack
LONDON (Reuter): Oil prices were jolted higher yesterday after
a car bomb at a military complex in Saudi Arabia killed 18
Americans and triggered fresh concerns about the political
stability of the world's leading oil exporting nation.
London August futures for international benchmark North Sea
Brent blend rose 15 cents to US$18.23 a barrel.
Oil markets are sensitive to events in the kingdom, dominant
member of the Organization of Petroleum Exporting Countries
(OPEC) and a key regional ally of the United States.
"In the short term there's no real concern for oil markets
because there's no immediate impact on supplies," said analyst
Mehdi Varzi at finance house Kleinwort Benson.
"But at a time when world oil demand is rising, and if these
worries persist, I think the market may be forced to start
factoring in the possibility, in the medium to long term, of
another oil shock in the Middle East."
A spate of guerrilla attacks in Bahrain, the election victory
in Israel of rightwinger Benjamin Netanyahu and a Turkish-Israeli
pact have all helped raise the political temperature across the
Middle East, Varzi said.
A bomb blast tore through the King Abdul-Aziz Air Base in
Khobar near Dhahran in eastern Saudi Arabia where 2,900 Americans
are stationed. It was the second bombing targeting Americans in
Saudi Arabia in the past year.
Saudi oil supplies were not disrupted by the blast. Oil
production of some eight million barrels per day (bpd), 11
percent of world demand, and exports of about six million bpd
continued as normal yesterday, well informed oil and shipping
sources said.
The Dhahran headquarters of state oil firm Saudi Aramco were
well away from the impact of the bomb, oil sources said.
But security at export terminals may be stepped up in coming
days to ensure there is no disruption to the exports, which earn
Riyadh more than $40 billion a year.
Traders said they believed Saudi oil exports were secure
though much might depend on how the United States reacts and
whether the explosion was linked to any internal strife.
Saudi Arabia's ruling royal family until recently appeared
immune to the type of Islamic fundamentalist militancy prevalent
elsewhere. But regional analysts have said political violence
might spill into the kingdom.
Over the past 20 years events in the Middle East have
triggered an oil price shock on three occasions.
The Arab oil embargo of 1973 and Iran's Islamic revolution
sent oil prices rocketing to $40 a barrel. Iraq's invasion of
Kuwait in 1990 briefly pushed oil back to $40 for fear of a
disruption to Saudi supplies.
"Middle East developments have been primarily responsible for
oil price shocks," said Kleinwort's Varzi. "It would be dangerous
to ignore the potential impact that another Middle East crisis
could have on the oil market."
In November last year five Americans and two Indians were
killed in an explosion in a car park near a U.S.-run military
training center in the Saudi capital, Riyadh.
In May four Saudis were executed for the Riyadh killings and a
Saudi source said the guerrillas were influenced by a Moslem
cleric in Jordan allegedly linked to a radical Islamic group.
Oil prices were jolted higher late last year when Saudi King
Fahd suffered a stroke and temporarily handed affairs of state to
his half brother, Crown Prince Abdullah.