Mainstream media on Saudi explosion

Oil jumps on Saudi pipeline explosion reports

US crude oil climbed over $US110 a barrel for the first time since May after an Iranian state-run news channel reported an explosion on a pipeline in Saudi Arabia.

Sydney Morning Herald,

2 March, 2012

Futures reached $US110.55 in late New York trade after Iran’s Press TV reported on its English-language website that “an explosion has hit oil pipelines in the flashpoint Saudi Arabian city of Awwamiya in the kingdom’s oil-rich Eastern province.”

However, Major General Mansour Al-Turki, a spokesman for the Saudi Interior Ministry, said no oil facility in the region has been sabotaged after reports of a fire near the Ras Tanura refinery.

“It looks like it’s a rumour but it shows you how sensitive the oil market is to any kind of supply constraint,” said Phil Streible, a Chicago-based commodities broker at RJO Futures.

Clashes between Saudi police and armed Shiite protesters in Awwamiya and al-Qatif, both cities in the oil-producing eastern region, have intensified since October when 11 police were injured in an attack.

Saudi authorities accuse Iran of stirring up the unrest. The protesters have cultural and family ties with Shiite-led Iran. Saudi Arabia’s royal family is Sunni.

"Oil is shooting higher due to the Saudi report, absolutely, no question about it,” said Phil Streible, a Chicago-based commodities broker at RJO Futures. “People are buying oil based on the news. Gold is also rising.”

Crude oil for April delivery rose $US1.77 to settle at $US108.84 a barrel on the Nymex before extending gains after the floor closed. The price was recently at $US108.81. Futures settled at a nine-month high of $US109.77 on February 24.

Brent oil for April settlement climbed $US3.54, or 2.9 per cent, to a 10-month high of $US126.20 a barrel on the London- based ICE Futures Europe exchange. Brent rose as high as $US128.40 after the settlement before dropping back to $US126.17.

Futures in New York rose 1.7 per cent in regular trading as US officials escalated warnings that the nation may join Israel in attacking Iran to stop the development of nuclear weapons and on economic reports signaling growth. The number of Americans filing first-time claims for jobless benefits fell and the Federal Reserve said yesterday that the housing market has shown improvement.

“The next few days could be very important as far as Iran is concerned,” said Matthew Dougherty, a managing director at Advisory Research. “The labour market is improving and we’re starting to see some sparkles of hope in the housing market. These two sectors have been weighing on the economy for the last several years.”

Brent’s premium to New York-traded West Texas intermediate oil widened to $US17.36 based on settlements. The premium has climbed with Iranian tensions and supplies in the US. Stockpiles at Cushing, Oklahoma, the delivery point for WTI, rose 1.65 million barrels to 33.8 million last week, the most since August, the Energy Department said yesterday.

“Brent is stronger because that’s where any disruption in supply is going to be felt,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St Louis. “The news came from an Iranian source, which is problematic.”

While Iran has said its atomic program is for civilian purposes, the US and its allies say the country is trying to develop the capacity to produce nuclear weapons.

General Norton Schwartz, the Air Force chief of staff, said yesterday that the Joint Chiefs of Staff have prepared military options to strike Iranian nuclear sites in the event of a conflict.

Israeli Prime Minister Benjamin Netanyahu is scheduled to address the American Israel Public Affairs Committee in Washington on March 5, a day after President Barack Obama speaks to the group, the main pro-Israel lobby in the US.

“We’re waiting to hear what Obama says to Aipac Sunday and to Netanyahu on Monday,” Dougherty said. “It wouldn’t take much to spook the market.”