PRAGUE - As oil traders
waited for the markets in New York and London to open on
Tuesday in order to gauge the impact of the latest
terrorist attack in Saudi Arabia, some industry analysts
said the attack on the oil city of al-Khobar has
increased the prospects of political instability in
Saudi Arabia. Others argued that future attacks against
Saudi oil installations could reduce overall production
or the kingdom's ability to export oil. In either case,
increases in the international oil price, which were
expected, have already begun.
The storming of
the offices and residences of foreign oil company
employees in Khobar on Saturday did not disrupt oil
flows from the kingdom, however, it did cause oil prices
to jump nearly 2 percent on Tuesday, and some analysts
predict that based on such instability, increases will
continue.
But Gavin Knight, communications
director at the London-based World Markets Research
Center, offered a more cautious perspective. Knight told
RFE/RL on Tuesday that the possibility of further
terrorist attacks against oil industry targets in Saudi
Arabia creates a "fear factor" that could cause oil
prices to rise as much as an additional US$8 per barrel.
But, he said, it is still too early to say whether this
will happen.
"In terms of the oil price itself,
there is a fear factor involved in the price that can
move it," Knight said. "It depends, basically, how the
futures market reacts and how great they perceive the
threat to be."
Knight noted that Saudi oil
exports were not disrupted by the violence in Khobar,
which left 22 people dead - 19 of them foreign
oil-sector workers. That's because the compound that was
stormed by suspected al-Qaeda militants on Saturday has
neither production nor refining facilities.
But
the attacks have raised fears that many foreign workers
will leave Saudi Arabia. Executives say oil-sector
subcontractors like Halliburton, Exxon-Mobil and
Royal-Dutch Shell are likely to adjust their staffs -
possibly re-basing some in nearby countries like
Bahrain.
With the latest violence coming just a
month after Islamic militants killed a US oil worker at
Saudi Arabia's Yanbu petrochemical complex, Knight
admitted that a troubling message is resonating in Saudi
Arabia: al-Qaeda now considers Western oil workers in
Saudi Arabia to be targets.
"Al-Qaeda forces
have been attacking strategic locations inside of Saudi
Arabia for some time," Knight said. "This new emphasis
on the oil market there is alarming. But the oil sector
has been dealing with this kind of high-risk premium for
some time. And also, it seems unlikely that [al-Qaeda]
would be able to take out all of the oil installations
in Saudi Arabia."
Knight said he believes
factors such as the rising demand for oil in China and
possible production increases by non-OPEC (Organization
for Petroleum Exporting Countries) countries such as
Russia will have more impact on global oil prices in the
long term than fears of terrorist attacks in Saudi
Arabia.
"There are a number of different
variables to take into account before people start
overreacting," Knight said. "I mean, people tend to
react quite quickly to these attacks and what the
implications are. But economically, even over and above
the oil price, the economic implications of terrorist
attacks are actually very small."
Fareed
Mohamedi, the chief economist for the Washington-based
consultancy firm PFC Energy, agrees with many of
Knight's observations. In an article published in
Tuesday's Washington Post, Mohamedi said the violence in
Khobar will not affect the physical flow of oil out of
Saudi Arabia. But he added that, from a psychological
point of view, "incredible fears in the market" are a
"reality, not just speculation".
Even before the
Khobar attacks, global oil prices this month rose to
their highest level in 13 years, to nearly $42 per
barrel. As a result, the Saudi government has promised
to increase its daily oil production from 8.5 million
barrels per day (bpd) to 9 million bpd and, if
necessary, will raise production again in the near
future to keep prices down.
A purported al-Qaeda
statement said the Saudi pledge was one of the reasons
that Islamic militants decided to attack foreign oil
firm employees in Khobar. Issued by an Islamist website,
the statement claimed responsibility for the Khobar
attacks and vowed to "cleanse the Arabian Peninsula of
infidels".
The website included a voice
recording of a man who identified himself as Abd al-Aziz
al-Muqrin, the Saudi dissident and leading al-Qaeda
operative who tops the kingdom's list of most-wanted
terrorist suspects.
"The heroic mujahedin have
managed to infiltrate the area housing the oil companies
such as Halliburton and her sisters in the city of
al-Khobar in the east of the Arabian Peninsula,"
al-Muqrin said in the recording. "The mujahedin managed
to kill and injure many crusaders of different
nationalities - among them, Americans, one of whom was
dragged through the streets of the city; a high-ranking
British national of one of the oil companies; and an
Italian who was slaughtered and returned as a gift to
his government and leader."
Al-Muqrin has
repeatedly issued calls for the Saudi royal family to be
overthrown. But until last year, the Saudi government
played down evidence that Islamic radicals posed a
threat to security. That has changed since a series of
deadly attacks - including last month's attack at the
Yanbu petrochemical complex. Saudi officials are now
seeking to reassure the global markets that their oil
pipelines, terminals and processing centers are
protected.
Nawaf Obaid, a Riyadh-based
consultant to the Saudi royal family, wrote this month
in an article for Jane's Intelligence Review that the
risk of a disruption of Saudi oil exports is very low.
Obaid said as many as 30,000 guards are now protecting
Saudi Arabia's oil infrastructure.
Copyright
(c) 2004, RFE/RL Inc. Reprinted with the permission of
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