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Big-time oil price hike in the offing

The country’s oil firms will implement a big-time oil price increase of as much as P2.30 per liter this week to reflect the impact of the Saudi Arabia drone attack, industry sources said Saturday.

READ: Drone hits spark fires at Aramco oil depots

The oil firms warned last week that pump prices will likely go up by more than P2 per liter due to the drone attacks which affected Saudi Arabia’s production.

READ: ‘Oil spike to cut PH deeply’

“Expect fuel prices to go up next week (Sept. 24 - 30, 2019).  Diesel should go up by P1.70-P1.80 and gasoline should go up by P2.20-P2.30. Load up accordingly,” Unioil Philippines said.

The oil firms said oil prices could have gone up further, fortunately, Saudi Aramco announced that it will be able resume production, thus tempering worries of tightness in global oil supply.

This is the second weekly oil price increase.

On  Sept. 17, most of the oil companies implemented a price increase of P1.35/liter for gasoline, P0.85/liter for diesel and P1.00/liter for kerosene.

Year-to-date adjustments stand at a net increase of P5.51/liter for gasoline, P4.02/liter for diesel and P2.01/liter for kerosene, according to the Energy Department. 

Extensive damage

Saudi Arabia on Friday revealed extensive damage to key oil facilities following weekend aerial strikes blamed on Iran, but vowed to quickly restore full production even as regional tensions soar.

Yemen’s Tehran-linked Huthi rebels, who on Friday announced a sudden halt to attacks on Saudi Arabia, claimed the strikes on state giant Aramco’s facilities in Khurais and the world’s largest oil processing facility at Abqaiq.

But Washington has pointed the finger at Tehran, condemning an “act of war” which knocked out half of Saudi Arabia’s oil production and on Friday prompted US President Donald Trump to sketch out the latest in a series of economic sanctions against Iran.

Abqaiq was struck 18 times while nearby Khurais was hit four times in a raid that triggered multiple explosions and towering flames that took hours to extinguish, Aramco officials said.

“Many critical areas of the [Abqaiq] plant were hit,” an Aramco official said, pointing out the strikes had a high degree of precision.

A towering stabilization column, normally silver, had been charred black with a gaping hole blown in the shaft’s base.

A separator plant also appeared ravaged in the raids and was surrounded by scaffolding and white-helmeted workers.

“There are 112 shift workers here in normal times. Now 6,000 workers are involved in restoration work,” said Aramco official Khaled al-Ghamdi, pointing at damaged infrastructure.

Aramco said it was shipping technical equipment from the US and Europe to speed up repairs.

In related developments:

US sends reinforcements

• The United States announced Friday (Saturday in Manila) that it was sending military reinforcements to the Gulf region following attacks on Saudi oil facilities that it attributes to Iran, just hours after President Donald Trump ordered new sanctions on Tehran.

Trump said the sanctions were the toughest-ever against another country but indicated he did not plan a military strike, calling restraint a sign of strength.

The Treasury Department renewed action against Iran’s central bank after US officials said Tehran carried out weekend attacks on rival Saudi Arabia’s oil infrastructure, which triggered a spike in global crude prices.

Those attacks, combined with an Iranian attack on an American spy drone in June, represented a “dramatic escalation of Iranian aggression,” Secretary of Defense Mark Esper said.

The Pentagon chief announced that the United States would send military reinforcements to the Gulf region at the request of Saudi Arabia and the United Arab Emirates.

“In response to the kingdom’s request, the president has approved the deployment of US forces, which will be defensive in nature, and primarily focused on air and missile defense,” Esper said.

However, Joint Chiefs of Staff Joe Dunford categorized the deployment as “moderate,” with the number of troops not expected to reach the thousands.

Earlier in the day, Trump attacked both critics who thought the mogul-turned-president would trigger war and hawks seeking a military response.

“The easiest thing I could do (is) knock out 15 different major things in Iran,” Trump said.

“But I think the strong-person approach and the thing that does show strength would be showing a little bit of restraint,” he said.

Iran’s warning 

• The commander of Iran’s Revolutionary Guards warned Saturday any country that attacks the Islamic republic would see its territory turn into the conflict’s “main battlefield.”

“Whoever wants their land to become the main battlefield, go ahead,” Guards commander Hossein Salami told a news conference in Tehran.

“We will never allow any war to encroach upon Iran’s territory.

“We hope that they don’t make a strategic mistake” as they have before, Salami said, before listing past US military “adventures” against Iran.

Salami was speaking at Tehran’s Islamic Revolution and Holy Defense museum during the unveiling of an exhibition of what Iran says are the US and other drones captured in its territory. 

Aramco flew dozens of international journalists to the two sites to show it was speeding up repairs, giving rare access to the nerve centre of the world’s largest oil producer as it seeks to shore up investor confidence ahead of a planned initial public offering (IPO).

“We will have production at the same level as before the strike by the end of this month -- we are coming back stronger,” asserted Fahad al-Abdulkareem, an Aramco general manager, during the visit to Khurais.

Badly warped thick metal piping—peppered with shrapnel during the aerial strikes—lay strewn around the area of the Khurais attack.

But Abdulkareem said that 30 percent of the Khurais plant was operational within 24 hours of the initial strikes.

Industry analyst Alex Schindelar, president of the Energy Intelligence Group, said that restoring sustainable production capacity to 11 million barrels per day by the end of the month is an “ambitious target, given the amount of repairs required”.

Retaliatory measures

Tehran has denied responsibility for the attacks against the heart of Saudi Arabia’s all-important oil industry, raising the specter of “all-out war” in the event of retaliatory measures by Washington or Riyadh.

The rhetoric has raised the risk of an unpredictable escalation in a tinderbox region where Saudi Arabia and Iran are locked in a decades-old struggle for dominance.

Chinese President Xi Jinping condemned the attacks but called for restraint during a phone call with Saudi Arabia’s King Salman on Friday.

US Secretary of State Mike Pompeo said Thursday there was “enormous consensus in the region” that Iran executed the attacks, despite its denials and the Yemeni rebels’ claims.

The Huthi rebels announced late Friday “the halt of all attacks against the territory of Saudi Arabia” as a peace initiative to end the country’s devastating conflict. There was no immediate reaction from Saudi authorities.

Huthi rebels have previously hit dozens of targets in Saudi Arabia, and their advancing arsenal has exposed the kingdom’s vulnerability despite vast military spending.

US, French and Saudi officials have disputed the Huthi claims, insisting they do not have the capability to mount such an advanced, coordinated strike.

Trump earlier this week vowed substantial new sanctions against Iran in response to the attacks and told reporters Friday they would target the country’s central bank.

The US Treasury Department said these latest sanctions were linked to “terrorism”, alleging Iran’s central bank had provided “billions of dollars” to two forces blacklisted by Washington.

“Treasury’s action targets a crucial funding mechanism that the Iranian regime uses to support its terrorist network, including the Qods Force, Hezbollah and other militants that spread terror and destabilize the region,” said Treasury Secretary Steven Mnuchin in a statement.

The Qods Force conducts international operations for Iran’s elite Revolutionary Guards, while Hezbollah is a powerful Shiite movement in Lebanon.

The Saudi defense ministry, which has said the attack was “unquestionably sponsored by Iran”, this week unveiled what it said were fragments of 25 drones and cruise missiles fired at the two oil hubs.

Trump in June authorized a military strike after Iran shot down the US spy drone, only to call it off at the last moment.

Saudi Arabia on Friday revealed extensive damage from the strikes on state giant Aramco’s facilities in Khurais and the world’s largest oil processing facility at Abqaiq.

The attacks, which knocked out half of Saudi Arabia’s oil production, have been claimed by Yemen’s Iran-backed Huthi rebels, but Washington has pointed its finger at Tehran, condemning the strikes as an “act of war.”

Abqaiq was struck 18 times while nearby Khurais was hit four times in a raid that triggered multiple explosions and towering flames that took hours to extinguish, Aramco officials said.

New ground for sanctions

The United States already maintains sweeping sanctions on Iran including on its central bank, with anyone who deals with it subject to prosecution, due to Tehran’s alleged nuclear program.

But the new sanctions Friday were imposed for the additional reason of “terrorism,” Treasury said, adding that Iran’s central bank had provided “billions of dollars” to two groups blacklisted by the United States.

“Treasury’s action targets a crucial funding mechanism that the Iranian regime uses to support its terrorist network, including the Qods Force, Hezbollah and other militants that spread terror and destabilize the region,” US Treasury Secretary Steven Mnuchin.

The Qods Force conducts international operations for Iran’s elite Revolutionary Guards, while Hezbollah, the Shiite militant group and political party in Lebanon, is among Iran’s closest regional partners.

Iran responded that the move showed that the United States was running out of options.

The United States also imposed sanctions on Iran’s sovereign wealth fund, whose board of trustees includes President Hassan Rouhani, as well as Etemad Tejarate Pars, a company that the Treasury Department said had sent money internationally on behalf of Iran’s defense ministry.

Trump recently said that he hopes for talks with Rouhani, who responded that Trump must first ease sanctions.

Last year, Trump pulled out of a nuclear accord with Iran negotiated under former President Barack Obama, sending tensions soaring as he tried to stop all countries from buying Iran’s oil. With AFP

READ: Oil price upsurge seen at P1.3/liter

READ: PH oil supply adequate—Cusi

Topics: oil price , Saudi Arabia drone attack , Unioil Philippines , Mark Esper
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