Iranian Saudi pipeline explosion claim boosts price of crude
02 March 2012
Brent crude jumped $5.74 to $128.40 per barrel in New York on March 1 after a report on an Iranian state-run news channel that a pipeline had exploded in Saudi Arabia. This was the highest price since July 2008, but prices fell back slightly after Saudi officials denied the reports.
Iran’s Press TV reported that there had been an oil pipeline explosion at Awwamiya in Saudi Arabia
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.”
Saudi Interior Ministry spokesman Major-General Mansour Al-Turki refuted this, saying no oil facility in the region had been sabotaged or damaged.
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.
Industry observers said the jump in price demonstrated the sensitivity of the oil market to any kind of supply disruption. Some also said that the Saudi pipeline explosion allegation could have been a move by Iran to spook the market and reap the rewards from an oil price spike. Despite a boycott of Iranian oil by many Western countries over its alleged efforts to develop nuclear weapons, Iran still derives most of its state revenue from oil sales.
The market is already in a state of tension over possible future Israeli attacks on Iranian nuclear facilities. Iran has said that, in the event of an attack, it will close the Straits of Hormuz, through which the bulk of the Gulf’s oil is shipped.