Tag Archives: Oil

Energy Transfer digs in on North Dakota pipeline expansion despite oil slump, sources say

By Laila Kearney and Devika Krishna Kumar

NEW YORK (Reuters) – U.S. pipeline company Energy Transfer has taken the rare step of invoking force majeure – normally used in times of war or natural disaster – to prevent oil firms from walking away from a proposed expansion of the controversial Dakota Access pipeline, according to two sources familiar with the matter.

Energy Transfer wants to nearly double the size of the line, and some companies that signed up say it is no longer necessary due to the sharp fall in U.S. oil production after the coronavirus pandemic. North Dakota is one of the costliest spots in the United States to produce crude, and its output has dropped by about one-third from last year, more than most other oil-producing states.

DAPL is the largest pipeline running out of North Dakota’s Bakken shale basin. It has capacity to ship 570,000 barrels per day (bpd) of crude to its endpoint in Illinois. Users say an expansion to 1.1 million bpd is unlikely to be filled because the state’s production is not expected to rebound soon.

“Honestly, DAPL is not needed,” said one customer who committed to space on the expanded line, speaking on condition of anonymity. “They’re trying to build a house that all these people signed up for. Even if there’s no longer a need for the house, you can’t really walk away from it. Would I like to get out? Yes, for sure.”

Energy Transfer, however, has invoked force majeure because it could not get the permits by a certain date, according to one shipper on the line and another familiar with the declaration. That buys the company more time to get regulatory approvals and prevents customers from walking away from their commitments.

The company declined to comment on the force majeure. Energy Transfer spokeswoman Lisa Coleman reiterated previous company statements that it has received enough interest to increase the pipeline’s capacity.

Pipelines are generally built after companies find customers willing to commit to shipping oil. That helps pipeline builders to line up financing for such projects, which take years to complete. Contracts to use future pipeline space usually allow customers to walk away from those agreements when substantial delays occur.

In an April filing with Illinois regulators, Energy Transfer said that “not one shipper has sought to withdraw from an existing agreement” despite the oil downturn and that demand exceeds DAPL’s current capacity. The company said in legal filings that the downturn is temporary.

North Dakota’s production has dropped by 450,000 bpd, down from a peak of nearly 1.5 million bpd reached last year, according to the Energy Information Administration’s data.

The expanded line is currently expected to enter service in late 2021.

At least a half-dozen U.S. oil pipeline projects have been put on hold indefinitely so far this year, according to U.S. Energy Department data. U.S. production has dropped from a record 12.9 million bpd in late 2019 to roughly 11 million bpd.

OPPOSITION IN ILLINOIS

DAPL drew thousands of people to North Dakota in 2016 in support of Native American tribes and environmental groups protesting the line’s initial construction. It eventually started in mid-2017 after months of delays.

To expand the line, Energy Transfer needs approval from regulators in North Dakota, South Dakota, Iowa and Illinois.

The first three have said yes, but environmental groups brought numerous legal challenges in Illinois starting a year ago. They argued the application was improperly filed and that an expansion increases the risk of large-scale leaks. The challenges may force the company to resubmit its application.

“They’re in force majeure right now because they did not get the permits,” one source with direct knowledge of the matter said.

An administrative law judge in Illinois could issue findings on the legal dispute as early as this month, though there is no timeline for that report. Once those findings are released, and both Energy Transfer and the opposition respond, the Illinois Commerce Commission will vote on whether the expansion can go forward. That vote has not been scheduled.

Even if producers wanted to fight Energy Transfer’s declaration of force majeure, they may be hesitant to initiate legal action due to the time and cost involved, said Ted Borrego, who has practiced oil and gas law for over 45 years and teaches at the University of Houston Law Center.

“Rarely will you see a shipper trying to bail out of a contract,” he said.

DAPL customers such as Hess Corp and refiner Marathon Petroleum, which invested in the original DAPL project, declined to comment specifically on any contractual agreements on DAPL or on the proposed expansion. Continental Resources, another large Bakken producer, did not respond to requests for comment.

“Hess believes that DAPL has and will continue to be a critical piece of U.S. energy infrastructure, which allows for transportation of crude oil into expanded domestic markets in the U.S. and abroad,” company spokesman Rob Young said.

Bakken crude producers generally break even on drilling at a price of about $46.50 a barrel, according to Deutsche Bank analysts, higher than other parts of the country. The U.S. crude oil benchmark is trading just below $40, after averaging just $17.50 in April and $33.70 in May.

While output in North Dakota has rebounded somewhat from its fall in May to less than 1 million bpd, production is expected to remain lower than its peak.

“At the moment I don’t think the demand is there from shippers for more DAPL, given the decline in Bakken output,” said Sandy Fielden, director of oil and products research at Morningstar in Austin, Texas.

(Reporting by Laila Kearney and Devika Krishna Kumar; Editing by Marguerita Choy)

Oil falls on fears of more COVID-19 cases

(Reuters) – Oil prices fell on Wednesday on fears about fresh outbreaks of COVID-19 but prices drew some support from stimulus measures and positive tests of a drug that could save some critically ill patients.

Brent crude was down 38 cents, or 0.9%, at $40.58 a barrel at 1335 GMT. U.S. West Texas Intermediate (WTI) fell 56 cents, or 1.5%, to $37.82 a barrel.

The World Health Organization said it was moving to update its guidelines after results showed the corticosteroid medication dexamethasone cut death rates by about a third among the most severely ill COVID-19 patients.

Yet concerns persisted about the spread of the virus in some regions and the risk of second waves in places where the spread had started to slow.

“The pandemic is rapidly evolving and the outlook for oil demand will, therefore, remain plagued by a degree of uncertainty,” said Stephen Brennock of broker PVM.

To contain the spread of a new virus outbreak in Beijing, scores of flights were canceled and schools shut.

“We think the oil market is not currently pricing in a significant probability of either second waves of coronavirus cases in key consumers and the associated lockdowns, or anything less than a rapid return to economic business-as-usual,” Standard Chartered analysts said, pointing to a downside risk for prices in the medium term.

Weak economic activity is still weighing on demand for crude. Oil imports in Japan, the world’s fourth-biggest crude buyer, slumped in May to the lowest in almost three decades.

However, the Organization of the Petroleum Exporting Countries forecast a gradual recovery in oil demand and said record supply cuts by the group and other producers were already helping rebalance the market.

Business confidence at Asian companies sank to an 11-year low in the second quarter, a Thomson Reuters/INSEAD survey found, with two-thirds of firms polled seeing a worsening COVID-19 pandemic as the biggest risk over the next six months.

(Reporting by Bozorgmehr Sharafedin in London; Additional reporting Jane Chung in Seoul; Editing by Louise Heavens, Mark Potter and David Clarke)

States ask Trump administration to pay laid off oil workers to plug abandoned wells

By Nichola Groom

(Reuters) – A coalition of U.S. oil-producing states has asked the Trump administration for stimulus funds to hire laid-off energy workers to plug abandoned wells, a proposal aimed at fending off unemployment while tackling a growing environmental problem, a spokeswoman for the group said.

The request from the Interstate Oil and Gas Compact Commission, a consortium of 31 states, comes as the coronavirus pandemic triggers a historic downturn in crude oil prices and fuel consumption, forcing the once-booming U.S. drilling industry to slash production and cut its workforce.

IOGCC spokeswoman Amy Childers said the group had recently asked the Department of Energy for stimulus funds “to help keep oil and gas crews working during the current crisis.” Childers did not say if a specific amount of funds was requested.

DOE officials would not comment on the proposal.

There are about 3 million abandoned oil and gas wells in the United States, about two-thirds of which are unplugged, according to the U.S. Environmental Protection Agency. That number is likely to grow as the current market meltdown pushes hundreds of drilling companies toward bankruptcy, according to industry analysts, bankruptcy attorneys and state regulators.

Unplugged wells are typically abandoned by distressed operators and can pose serious environmental and safety risks if left to leach pollutants into the air and water. Most state governments lack sufficient funding to plug all the wells themselves, according to the IOGCC.

The push from U.S. states comes after Canada said last month that it would invest $1.2 billion to clean up abandoned wells in three provinces as part of a suite of measures to help the hard-hit oil and gas industry during the coronavirus outbreak.

U.S. states would like to see a similar commitment from the Trump administration, Oklahoma Secretary of Energy and Environment Kenneth Wagner said in an email.

“Oklahoma is certainly supportive of the idea around a stimulus similar to what has been done in Canada around plugging abandoned wells,” he said. Oklahoma has roughly 4,000 abandoned and unplugged wells, according to state records.

North Dakota’s top energy official, Lynn Helms, said at a public meeting last month that his state is seeking federal stimulus money to tackle its list of around 800 abandoned wells: “We’ll be asking for some of this money.”

(Reporting by Nichola Groom; editing by Richard Valdmanis and Marguerita Choy)

Iranian president says U.S. offered to remove all sanctions on Iran in exchange for talks

FILE PHOTO: Iranian President Hassan Rouhani gestures at the conclusion of his address to the 69th United Nations General Assembly at the United Nations Headquarters in New York, September 25, 2014. REUTERS/Mike Segar/File Photo

By Babak Dehghanpisheh

GENEVA (Reuters) – The United States offered to remove all sanctions on Iran in exchange for talks but Tehran has not yet accepted the offer due to the current “toxic atmosphere”, Iranian President Hassan Rouhani said on Friday.

Rouhani, speaking on his return from the United Nations General Assembly in New York, said he met there with U.S. officials at the insistence of Germany, Britain and France.

“It was up for debate what sanctions will be lifted and they (the United States) had said clearly that we will lift all sanctions,” Rouhani said, according to his official website.

Iran was ready for negotiations but not in an atmosphere of sanctions and pressure, the Iranian president said.

“This action wasn’t in a manner that was acceptable, meaning that in the atmosphere of sanctions and the existence of sanctions and the toxic atmosphere of maximum pressure, even if we want to negotiate with the Americans in the 5+1 framework, no one can predict what the end and result of this negotiation will be,” he said.

Crude slipped on the report, adding to earlier losses caused by a faster-than-expected recovery in Saudi output, slowing Chinese economic growth, a Wall Street Journal report saying that Saudi Arabia had agreed a partial ceasefire in Yemen. Brent crude was trading below $62 a barrel. [O/R]

Rouhani did not meet U.S. President Donald Trump in New York and European and Gulf officials expect Washington to keep tightening the vice on Iran’s economy.

The United States and Iran are at odds over a host of issues, including the U.S. withdrawal from the 2015 Iran nuclear deal, U.S. accusations – denied by Tehran – that Iran attacked two Saudi oil facilities on Sept. 14, and Iran’s detention of U.S. citizens on what the United States regards as spurious grounds.

(Reporting by Babak Dehghanpisheh; Editing by Angus MacSwan)

Israeli minister urges unity government to stave off ‘blow-up’ in Iran tensions

FILE PHOTO: Israeli Energy Minister Yuval Steinitz speaks during an interview with Reuters in Cairo, Egypt January 14, 2019. REUTERS/Mohamed Abd El Ghany/File Photo

JERUSALEM (Reuters) – Israel’s energy minister on Friday warned tensions between Iran and the United States were reaching a breaking point and an Israeli unity government deal was needed to stave off the threat of conflict following an inconclusive election last week.

Washington has blamed Iran for a Sept. 14 attack on Saudi Arabia’s oil facilities, and on Thursday announced it would send radar systems and Patriot missiles to the kingdom to bolster its defenses. Iran denies carrying out the attack.

Yuval Steinitz, who is also a member of Prime Minister Benjamin Netanyahu’s security cabinet, warned “we are on the verge of the Iran situation blowing up”.

“(The) chances of an American-Iranian or Saudi-Iranian blow-up, or a blow-up in the Gulf which, if it happens, is liable to reach us too, is something that is very, very tangible and realistic,” Steinitz told Tel Aviv radio station 102 FM on Friday.

Steinitz, a member of Netanyahu’s right-wing Likud party, said the potential for a wider conflict “is another reason for the need to hasten and form a broad unity government now, and not to be dragged into months of boycotts and discussions.”

On Wednesday, Netanyahu was tapped to try to form the next coalition government after garnering marginally more support from lawmakers than his centrist rival, Benny Gantz, in a Sept. 17 election.

Neither leader was able on his own to put together a coalition with a ruling majority or reach a power-sharing deal for a unity government between their two parties.

However, with little appetite among Israeli voters for a third trip to the polls in less than a year if no government emerges, public pressure could grow for Netanyahu and Gantz to compromise and join forces.

(Reporting by Rami Ayyub and Dan Williams, Editing by William Maclean)

Khamenei says Iran should give up hope of European help against U.S. sanctions

DUBAI (Reuters) – Iranian Supreme leader Ayatollah Ali Khamenei said on Thursday European countries were unlikely to help Iran against U.S. sanctions, and Tehran “should give up all hope” in that regard, according to his official website.

Britain, France and Germany, parties to a 2015 nuclear deal with Iran, have tried to set up a trade mechanism to barter humanitarian and food goods with Iran after the United States withdrew from the deal last year and re-imposed sanctions. But the mechanism is still not operational.

Iran has repeatedly said it will ramp up its nuclear activities unless the European countries do more to protect its economy from the impact of the U.S. sanctions.

“Despite their promises, the Europeans have practically adhered to America’s sanctions and have not taken any action and are unlikely to do anything for the Islamic Republic in the future. So one should give up all hope on Europeans,” Khamenei was quoted as saying.

“There should be no trust in countries that have held the banner of hostility to (Iran’s) Islamic system, led by the United States and some European countries, because they are openly hostile to the Iranian people,” Khamenei said.

“The road to interaction and negotiations is open to all countries other than America and the Zionist regime (Israel),” Khamenei told members of a powerful clerical body.

(Reporting by Dubai newsroom; Editing by John Stonestreet and Peter Graff)

Inside Saudi Arabia’s response to a raid on the heart of the oil kingdom

By Rania El Gamal, Stephen Kalin and Marwa Rashad

KHURAIS, Saudi Arabia(Reuters) – Saudi Arabia’s newly appointed energy minister was in London when he learned in the middle of the night of the largest-ever attack on the kingdom’s oil infrastructure.

Prince Abdulaziz bin Salman, a veteran oil official and senior member of the Al Saud ruling family, hurried back to the kingdom, flying by private jet to Aramco’s headquarters in Dhahran to assess the damage and manage the fallout from the attack on the world’s largest oil exporter, three sources close to the matter said. Officials at state-run oil company Saudi Aramco, meanwhile, gathered in what was referred to internally as the “emergency management room” at the company’s headquarters.

Interviews with at least a dozen Gulf and Western officials provide the most detailed account to date of the response by Saudi officials and state oil company Aramco to the most destructive strike on Saudi Arabia since it opened an offensive in Yemen more than four years ago. The attack knocked out more than half the kingdom’s oil production, or almost 6 percent of global oil output.

Saudi Arabia has said Iran was responsible, an assessment that U.S. officials share.

Iranian officials were unavailable to comment but Iran has denied involvement.

Yemen’s Houthi movement, an ally of Iran battling a Western-backed, Saudi-led coalition has claimed responsibility. But Gulf diplomats and regional officials say they are skeptical of the claim given the sophistication of the attacks.

The Saudi energy ministry declined to comment on its response to the attacks. The government communications office did not immediately respond to a request for comment.

The attacks place pressure on both U.S. President Donald Trump and Saudi Arabia’s day-to-day leader Crown Prince Mohammed bin Salman, who have worked closely together to contain Iran’s growing regional influence. Both nations have stressed the need for caution.

U.S. Secretary of State Mike Pompeo has described the attacks as “an act of war” against Saudi Arabia, though Trump says there are options short of war. Iran has warned that any U.S. or Saudi military strike against the country would bring “all-out war.”

(Graphics on ‘Strikes on Saudi oil disrupt global supply’ – https://tmsnrt.rs/302z0Hm)

MISSILES AND DRONES

Shortly after 3:30 a.m. local time on Saturday, 25 drones and low-flying missiles struck two of Saudi Arabia’s largest oil facilities located in the east of the kingdom, according to Saudi officials.

Amin Nasser, the chief executive of state-run Saudi Aramco, which owns the two plants, rushed to Aramco’s emergency-response room at the company’s headquarters in the oil-producing Eastern Province, where he was joined by other senior managers, according to several people briefed on the matter. There was a sense of shock at the scale of the damage, some of the people said.

By the time Aramco’s team was dealing with the fires at the first site in Khurais, where more than 200 people were at the time, strikes were still hitting the facility, according to the company. More than a hundred contractors were immediately evacuated.

A Saudi Aramco spokesman declined to comment on questions from Reuters about the company and the CEO’s response to the attacks.

Saudi officials believed Iran was responsible because the intensity of the attack was beyond the capability of the Houthi, but they wanted to gather evidence before going public with the claims, according to Gulf diplomats and regional officials.

Saudi officials also spoke to their allies, in some instances requesting assistance with experts to help with the investigation and help in strengthening air defenses. On Saturday, Prince Mohammed provided Trump an update by phone, according to a U.S. official. Trump offered “his support for Saudi Arabia’s self-defense,” according to the White House readout of the call.

U.S. officials also quickly came to believe that the attack did not come from Yemen and that Iran was responsible, according to U.S. officials who briefed reporters. The Houthi had not struck that distance before or in such a “precise and coordinated fashion,” said a senior administration official.

(Graphics on ‘Iran and Saudi Arabia are locked in a battle for regional supremacy, fighting proxy wars’ – https://tmsnrt.rs/31rShzd)

“PHOENIX FROM THE ASHES”

By midday Saturday in Saudi Arabia, Nasser and other senior company Aramco executives were headed to the damaged plants, first to Khurais and then to Abqaiq, one of the sources briefed on the matter said.

That night, Nasser was joined at Abqaiq, the world’s biggest oil processing facility, by Prince Abdulaziz and Aramco’s new chairman Yassir al-Rumayyan, according to sources and pictures released by the state news agency.

Aramco, which runs a variety of large projects in the kingdom, deployed more than 5,000 contractors and pulled employees from other projects to work around the clock to bring production back, according to Nasser’s public comments and one of the sources briefed on the matter.

Initial assessments were that the damage was significant and that bringing full production back online could take weeks or even months, said Saudi officials and industry sources who visited the sites or were briefed on the attacks.

Saudi oil officials were scrambling to produce a report on the extent damage for the kingdom’s top leadership, including King Salman, the energy minister’s father, according two of the sources briefed on the matter. But engineers needed 48 more hours for a final assessment, the people said.

Crude markets would begin trading again in two days and Saudi Arabia was under pressure to reassure buyers that oil supplies will not be disrupted.

“Imagine if this (production) didn’t come back on time the whole global security of supply is going to be impacted,” Nasser told reporters earlier this week. “We have a lot of projects in the kingdom… so we have all of the workforce that’s needed to rebuild, reconstruct and put it back,” he said.

By Tuesday, the kingdom had managed to restore full supplies to customers by drawing oil from their massive oil inventories. The company also announced production would return sooner than expected – by the end of the month. Aramco had emerged “like a phoenix from the ashes,” said Prince Abdulaziz in remarks to news media that night in Red Sea city of Jeddah.

The news restored some confidence, prompting a fall in oil prices that had jumped on Monday.

ATTACK EVIDENCE

The Saudis continued to analyze the attack debris. That included aerial weaponry that missed their targets and was recovered just to the north, according to U.S. officials.

The United States dispatched to Saudi Arabia forensic specialists to assist in the effort; France said it was also sending investigative experts.

On Wednesday, Saudi Arabian officials publicly accused Iran of involvement. At a news conference, a defense ministry official displayed drone and missile debris it said was undeniable evidence of Iranian aggression and identified the drones as Iranian Delta Wing unmanned aerial vehicles.

“The attack was launched from the north and unquestionably sponsored by Iran,” said the official, Colonel Turki al-Malki.

U.S. officials fingered southwest Iran as the staging ground, an assessment based at least in part on still-classified imagery showing Iran appearing to prepare an aerial strike, according to two U.S. officials.

On Thursday, the United States was considering sending anti-missile batteries, drones and more fighter jets to Saudi Arabia, U.S. officials said.

“Frankly there’s just not enough defense capability in the country, if you could be hit from multiple directions,” one U.S. official told Reuters.

It is possible the attacks were launched from more than one location, a Western security source said. “The exact launch location is important as it determines the response and there does have to be a response,” the person said.

On Friday, repair work to the oil plants was ongoing. At the Khurais facility, parts of the facility were visibly burnt and pipes melted. During a tour of the site organized by the company, Fahad Abdulkarim, general manager for Aramco’s southern area oil operations, told reporters that the company is shipping equipment from the United States and Europe to help repair the damage.

(Marwa Washad reporting from Jeddah. Additional reporting by Parisa Hafezi in Dubai, Guy Faulconbridge in London, and Roberta Rampton, Steve Holland and Phil Stewart in Washington.; Writing by Michael Georgy; Editing by Cassell Bryan-Low and Jason Szep)

Trump says he does not want war after attack on Saudi oil facilities

By Steve Holland and Rania El Gamal

WASHINGTON/DUBAI (Reuters) – U.S. President Donald Trump said on Monday it looked like Iran was behind attacks on oil plants in Saudi Arabia but stressed he did not want to go to war, as the attacks sent oil prices soaring and raised fears of a new Middle East conflict.

Iran has rejected U.S. charges it was behind the strikes on Saturday that damaged the world’s biggest crude-processing plant and triggered the largest jump in crude prices in decades.

Relations between the United States and Iran have deteriorated since Trump pulled out of the Iran nuclear accord last year and reimposed sanctions over Tehran’s nuclear and ballistic programs. Washington also wants to pressure Tehran to end its support of regional proxy forces, including in Yemen where Saudi forces have been fighting Iran-backed Houthis for four years.

The United States was still investigating if Iran was behind the Saudi strikes, Trump said, but “it’s certainly looking that way at this moment”.

Trump, who has spent much of his presidency trying to disentangle the United States from wars he inherited, made clear, however, he was not going to rush into a new conflict on behalf of Saudi Arabia.

“I’m somebody that would like not to have war,” Trump said.

Several U.S. Cabinet members, including Secretary of State Mike Pompeo and Energy Secretary Rick Perry, have blamed Tehran for the strikes. Pompeo and others will travel to Saudi Arabia soon, Trump said.

A day after saying the United States was “locked and loaded” to respond to the incident, Trump said on Monday there was “no rush” to do so.

“We have a lot of options but I’m not looking at options right now. We want to find definitively who did this,” he said.

Iranian President Hassan Rouhani said the strikes were carried out by “Yemeni people” retaliating for attacks by a Saudi-led military coalition in a war with the Houthi movement.

“Yemeni people are exercising their legitimate right of defense,” Rouhani told reporters during a visit to Ankara.

Iranian Foreign Ministry spokesman Abbas Mousavi called the allegations “unacceptable and entirely baseless.”

The attacks cut 5% of world crude oil production.

Oil prices surged by as much as 19% after the incidents, the biggest intraday jump since the 1990-91 Gulf crisis over Iraq’s invasion of Kuwait. Prices retreated from their peak after Trump said he would release U.S. emergency supplies and producers said there were enough stocks globally to make up for the shortfall.

Japan said it will consider coordinated release of its oil reserves and other measures if needed to ensure sufficient supplies in the wake of the attacks.

Crude prices were down around 1% in Asian trade on Tuesday.

“The question is how long it takes for the supply to get back online,” said Esty Dwek, head of global market strategy at Natixis Investment Managers.

“However, the (geopolitical) risk premium … which has been basically ignored by markets in favor of growth worries in recent months, is likely to be priced in going forward,” she said.

SAUDI SUSPICIONS

Saudi Arabia said the attacks were carried out with Iranian weapons and urged U.N. experts to help investigate the raid.

Crown Prince Mohammed bin Salman said Iranian threats were not only directed against the kingdom but against the Middle East and the world.

While the prince did not directly accuse Tehran, a Foreign Ministry statement reported him as calling on the international community to condemn whoever was behind the strike.

“The kingdom is capable of defending its land and people and responding forcefully to those attacks,” the statement added.

Saudi Arabia and Iran have been enemies for decades and are fighting a number of proxy wars.

Trump said he had not made commitments to protect the Saudis.

“No, I haven’t promised Saudis that. We have to sit down with the Saudis and work something out,” he said. “That was an attack on Saudi Arabia, and that wasn’t an attack on us. But we would certainly help them.”

Two sources briefed on state oil company Saudi Aramco’s operations told Reuters it might take months for Saudi oil production to return to normal. Earlier estimates had suggested it could take weeks.

Saudi Arabia said it would be able to meet oil customers’ demand from its ample storage, although some deliveries had been disrupted. At least 11 supertankers were waiting to load oil cargoes from Saudi ports, ship tracking data showed on Monday.

RISING TENSIONS

Tension in the oil-producing Gulf region has dramatically escalated this year after Trump imposed severe U.S. sanctions on Iran aimed at halting its oil exports altogether.

For months, Iranian officials have issued veiled threats, saying that if Tehran is blocked from exporting oil, other countries will not be able to do so either. But Iran has denied a role in specific attacks, including bombings of tankers in the Gulf and previous strikes claimed by the Houthis.

Trump has said the goal from his “maximum pressure” approach is to force Iran to negotiate a tougher agreement and has left open the possibility of talks with Rouhani at an upcoming U.N. meeting. Iran says there can be no talks until Washington lifts sanctions.

U.N. Yemen envoy Martin Griffiths told the U.N. Security Council on Monday it was “not entirely clear” who was behind the strike but he said it had increased the chances of a regional conflict.

But the U.S. ambassador to the world body, Kelly Craft, said emerging information on the attacks “indicates that responsibility lies with Iran” and there is no evidence it came from Yemen.

Iran’s Yemeni allies have promised more strikes to come. Houthi military spokesman Yahya Sarea said the group carried out Saturday’s predawn attack with drones, including some powered by jet engines.

“We assure the Saudi regime that our long arm can reach any place we choose and at the time of our choosing,” Sarea tweeted. “We warn companies and foreigners against being near the plants that we struck because they are still in our sights.”

U.S. officials say they believe the attacks came from the opposite direction, possibly from Iran itself rather than Yemen, and may have involved cruise missiles. Wherever the attacks were launched, however, they believe Iran is to blame.

The attacks have raised questions about how Saudi Arabia, one of the world’s top spenders on weaponry, much of it supplied by U.S. companies, was unable to protect oil plants from attack.

Sensing a commercial opening, President Vladimir Putin said Russia was ready to help Saudi Arabia by providing Russian-made air defense systems to protect Saudi infrastructure.

Russia and China said it was wrong to jump to conclusions about who was to blame for the attack on Saudi Arabia.

(Reporting by Steve Holland in Washington and Rania El Gamal in Dubai; Writing by William Maclean, Mike Collett-White and Doina Chiacu; Editing by Alistair Bell, Peter Cooney & Simon Cameron-Moore)

U.S. blames Iran for Saudi oil attack, Trump says ‘locked and loaded’

A satellite image shows an apparent drone strike on an Aramco oil facility in Abqaiq, Saudi Arabia September 14, 2019. Planet Labs Inc/Handout via REUTERS

By Roberta Rampton and Arshad Mohammed

WASHINGTON (Reuters) – U.S. President Donald Trump said on Sunday the United States was “locked and loaded” for a potential response to the attack on Saudi Arabia’s oil facilities, after a senior U.S. administration official said Iran was to blame.

Trump also authorized the use of the U.S. emergency oil stockpile to ensure stable supplies after the attack, which shut 5% of world production and sent crude prices soaring more than 19% in early trade on Monday, before moderating to show a 10% gain.

“There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!” Trump said on Twitter.

Earlier in the day, a senior U.S. official told reporters that evidence from the attack, which hit the world’s biggest oil-processing facility, indicated Iran was behind it, instead of the Yemeni Houthi group that had claimed responsibility.

U.S. Secretary of State Mike Pompeo also said there was no evidence the attack came from Yemen, where a Saudi-led coalition has been battling the Houthis for over four years in a conflict widely seen as a proxy war between Saudi Arabia and Shi’ite Muslim rival Iran.

“Amid all the calls for de-escalation, Iran has now launched an unprecedented attack on the world’s energy supply,” Pompeo said.

Iranian Foreign Ministry spokesman Abbas Mousavi dismissed the U.S. allegations that it was responsible was “pointless”. A senior Revolutionary Guards commander warned the Islamic Republic was ready for “full-fledged” war.

“All American bases and their aircraft carriers in a distance of up to 2,000 kilometers around Iran are within the range of our missiles,” the semi-official Tasnim news agency quoted Commander Amirali Hajizadeh as saying.

Tensions between Washington and Tehran were already running high because of a long-running dispute between the two nations over Iran’s nuclear program that led the United States to impose sweeping sanctions.

Oil prices surged as much as 19% in early Asian trade on Monday on worries over global supply and soaring tensions in the Middle East.

Brent crude posted its biggest intra-day percentage gain since the start of the Gulf War in 1991.

State oil giant Saudi Aramco said the attack on Saturday had cut output by 5.7 million barrels per day.

The U.S. official, who asked not to be named, said on Sunday there were 19 points of impact in the attack on Saudi facilities and evidence showed the launch area was west-northwest of the targets – not south from Yemen.

The official added that Saudi officials indicated they had seen signs that cruise missiles were used in the attack, which is inconsistent with the Iran-aligned Houthi group’s claim that it conducted the attack with 10 drones.

“There’s no doubt that Iran is responsible for this. No matter how you slice it, there’s no escaping it. There’s no other candidate,” the official told reporters.

Riyadh has accused Iran of being behind previous attacks on oil-pumping stations and the Shaybah oil field, charges that Tehran denies, but has not blamed anyone for Saturday’s strike. Riyadh also says Tehran arms the Houthis, a charge both deny.

Richard Nephew, a program director at Columbia University’s Center on Global Energy Policy, said if Iran was responsible for the attack, it may be as retribution for U.S. sanctions.

“They are making decisions about whether and how to respond to what they see as a massive attack on their interests from the U.S. via sanctions by attacking U.S. interests in turn, and those of U.S. partners they believe are responsible for U.S. policy,” he said.

Aramco gave no timeline for output resumption. A source close to the matter told Reuters the return to full oil capacity could take “weeks, not days”.

Riyadh said it would compensate for the damage at its facilities by drawing on its stocks, which stood at 188 million barrels in June, according to official data.

Trump said he had “authorized the release of oil from the Strategic Petroleum Reserve, if needed, in a to-be-determined amount sufficient to keep the markets well-supplied.”

CALLS FOR RESTRAINT

Consultancy Rapidan Energy Group said images of the Abqaiq facility after the attack showed about five of its stabilization towers appeared to have been destroyed, and would take months to rebuild – something that could curtail output for a prolonged period.

“However Saudi Aramco keeps some redundancy in the system to maintain production during maintenance,” Rapidan added, meaning operations could return to pre-attack levels sooner.

The Saudi bourse closed down 1.1% on Sunday, with banking and petrochemical shares taking the biggest hit. Saudi petrochemical firms announced a significant reduction in feedstock supplies.

“Abqaiq is the nerve center of the Saudi energy system. Even if exports resume in the next 24 to 48 hours, the image of invulnerability has been altered,” Helima Croft, global head of commodity strategy at RBC Capital Markets, told Reuters.

Some Iraqi media outlets said the attack came from there. Baghdad denied that on Sunday and vowed to punish anyone using Iraq, where Iran-backed paramilitary groups wield increasing power, as a launchpad for attacks.

Kuwait, which borders Iraq, said it was investigating the sighting of a drone over its territory and coordinating with Saudi Arabia and other countries.

U.N. Secretary-General Antonio Guterres condemned Saturday’s attacks and called on all parties to exercise restraint and prevent any escalation. The European Union warned the strikes posed a real threat to regional security, and several nations urged restraint.

The attack came after Trump said a meeting with Iranian President Hassan Rouhani was possible at the U.N. General Assembly in New York this month. Tehran ruled out talks until sanctions are lifted.

But Trump appeared on Sunday to play down the chances he might be willing to meet with Iranian officials, saying reports he would do so without conditions were not accurate.

As recently as last Tuesday, Pompeo said Trump “is prepared to meet with no preconditions”.

Saudi de facto ruler Crown Prince Mohammed bin Salman told Trump that Riyadh was ready to deal with “terrorist aggression”. A Saudi-led coalition has responded to past Houthi attacks with airstrikes on the group’s military sites in Yemen.

The conflict has been in military stalemate for years. The Saudi alliance has air supremacy but has come under scrutiny over civilian deaths and a humanitarian crisis that has left millions facing starvation.

(Reporting by Roberta Rampton and Arshad Mohammed; Additional reporting by Rania El Gamal and Parisa Hafezi, Saeed Azhar and Hadeel Al Sayegh in Dubai, David Shepardson and Timothy Gardner in Washington, William James in London, John Irish in Paris, Alex Lawler, Julia Payne and Ron Bousso in London, Robin Emmott in Brussels and Devika Krishna Kumar and Michelle Nichols in New York; Writing by Ghaida Ghantous and Richard Valdmanis; Editing by William Maclean, Peter Cooney & Simon Cameron-Moore)

U.S. says Navy ship ‘destroyed’ Iranian drone in Gulf

USS Boxer (LHD-4) ship sails near a tanker in the Arabian Sea off Oman July 17, 2019. REUTERS/Ahmed Jadallah

By Steve Holland and Idrees Ali

WASHINGTON (Reuters) – The United States said on Thursday that a U.S. Navy ship had “destroyed” an Iranian drone in the Strait of Hormuz after the aircraft threatened the vessel, but Iran said it had no information about losing a drone.

In the latest episode to stir tensions in the Gulf, U.S. President Donald Trump told an event at the White House that the drone had flown to within 1,000 yards of the USS Boxer and had ignored “multiple calls to stand down.”

“This is the latest of many provocative and hostile actions by Iran against vessels operating in international waters. The United States reserves the right to defend our personnel, facilities and interests,” Trump said.

“The drone was immediately destroyed,” he added.

Iranian Foreign Minister Mohammad Javad Zarif told reporters at the United Nations: “We have no information about losing a drone today.”

The Pentagon said in a statement that the USS Boxer, an amphibious assault ship, had taken “defensive action” against a drone on Thursday morning as the Boxer was moving into the Strait of Hormuz.

“We do assess it was an Iranian drone,” said Commander Rebecca Rebarich, a Pentagon spokeswoman.

Tensions in the Gulf region are high, with fears that the United States and Iran could stumble into war.

The United States has blamed Iran for a series of attacks since mid-May on shipping around the Strait of Hormuz, the world’s most important oil artery. Tehran rejects the allegations.

Iran in June shot down a U.S. military surveillance drone in the Gulf with a surface-to-air missile. Iran says the drone was in its airspace, but Washington says it was in international skies.

Trump said at the time the United States had come close to launching a military strike on Iran in retaliation for the downing of the U.S. drone.

The increased use of drones by Iran and its allies for surveillance and attacks across the Middle East is raising alarms in Washington.

The United States believes that Iran-linked militia in Iraq has recently increased their surveillance of American troops and bases in the country by using off-the-shelf, commercially available drones, U.S. officials say.

A U.S. official, speaking on condition of anonymity, said the drone on Thursday was brought down through electronic jamming.

NUCLEAR DEAL

Relations between the United States and Iran have worsened since last year when Trump abandoned a 2015 deal between world powers and Iran in which Tehran agreed to restrict nuclear work in return for the lifting of sanctions.

The United States has reimposed sanctions to throttle Iran’s oil trade and says it wants to increase pressure on Tehran to renegotiate the accord, discuss its ballistic missile program and modify its behavior in the Middle East, where Washington is allied to several Arab states opposed to Iran.

Iran’s clerical rulers have ruled out renegotiating the nuclear deal or holding talks on its missile program, which it says is purely defensive.

But Zarif told reporters on Thursday that Iran had offered to make a concession on its nuclear program – to ratify a document prescribing more intrusive inspections – if the United States abandoned its economic sanctions – a proposal that drew U.S. skepticism.

“If Iran wants to make a serious gesture, it should start by ending uranium enrichment immediately,” a U.S. senior administration official said, adding any talks should include “a permanent end to Iran’s malign nuclear ambitions, including its development of nuclear-capable missiles.”

Earlier on Thursday, the United States demanded Iran immediately release a vessel it seized in the Gulf, and a U.S. military commander in the region said the United States would work “aggressively” to ensure free passage of vessels through the vital waterway.

Iran played down the seizure of the ship, which it said was a small vessel that was smuggling oil.

Iranian state TV aired footage of a vessel called “RIAH.”

The Panamanian-flagged oil tanker MT Riah disappeared off trackers in Iranian territorial waters days ago.

“We do this (inspecting ships) every day. These are people who smuggle our oil,” Iran’s Press TV quoted Zarif as saying, adding: “It was a small ship used to smuggle 1 million liters – not 1 million barrels – of crude oil.”

Washington has recently beefed up its military presence and the U.S. Fifth Fleet, based in Bahrain, says that Gulf Arab states have stepped up patrols.

Revolutionary Guards Commander-in-Chief Hossein Salami said on Thursday that Iran had adopted a defensive strategy, but warned that “if our enemies make any mistakes … our strategy can become an offensive one.”

Oil prices jumped on Thursday after news of the ship seizure. They later fell, however, on weakness in U.S. equities markets and an expectation that crude output would rise in the Gulf of Mexico following last week’s hurricane in the region.

The United States on Thursday imposed sanctions on an international network of companies and their agents it said were involved in the procurement of materials for Iran’s nuclear program.

(Reporting by Steve Holland and Idrees Ali; Additional reporting by Parisa Hafezi and Tuqa Khalid in Dubai; Writing by Alistair Bell and Mary Milliken; Editing by Peter Cooney)