The oil market is facing uncertainty after an attack on Saudi Arabia’s oil infrastructure over the weekend eliminated about 5% of the global oil supply.
“The United States, the West, even places like China should be very, very concerned about this, because this could and can become a real, real problem down the road,” Joseph Westphal, former U.S. Ambassador to Saudi Arabia and the Lauder Institute Senior Fellow at the University of Pennsylvania's Wharton School, told Yahoo Finance’s On the Move.
Saturday’s attack on Aramco’s Abqaiq oil-processing facility and Khurais oil field was the largest attack in history on Saudi Arabia’s oil infrastructure. It cut off close to 6 million barrels a day in production. On Tuesday, Saudi Arabia’s oil ministry said the country will restore most of its oil output and fully recover by the end of month— much earlier than anticipated.
“If we go into a real conflict there, the shipping channels could be shut down.” Westphal said. “And that would really affect oil deliveries and oil production around the world.”
US-Saudi relationship ‘very critical’
As Saudi Arabia investigates the attacks, the country is beginning to believe that Iran launched the missile and drone from its southwestern territory, according to the Wall Street Journal. Investigators discovered debris that appears to be Iranian cruise missile technology, the Journal reported.
“Those missiles are coming, and those rockets are coming, and those drones are coming from Iran, the only place that I can determine they would be coming from,” Westphal said. “I’m sure inside their own country, Iran is having a turbulent discussion about how far they want to go with this, in terms of provoking the United States.”
On Sunday evening, President Trump tweeted that the U.S. has “reason to believe that we know” who is responsible for the attack on Saudia Arabia’s oil field. On Monday, U.S. officials reportedly told Saudi Arabia that Iran was behind the attack. Yemen's Houthi rebels took responsibility for the attacks earlier this week, but they have been backed by Iran.
“I think we should be very actively involved in this,” Westphal said. “A relationship with Saudi Arabia is very, very critical to us.”
Valentina Caval is a Producer at Yahoo Finance.