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Attacks have disrupted 5% of the world’s oil production. Here’s what you need to know

Attacks on major oil plants in Saudi Arabia have shaken up global oil markets and complicated the already strained relations between the kingdom and its regional arch-rival Iran. Get up to speed fast here:

What happened over the weekend?

Coordinated strikes targeted key Saudi Arabian oil facilities early on Saturday morning, causing a dramatic escalation in tensions between Iran and Saudi Arabia.

Two crude processing facilities were hit: Abqaiq and Khurais. Abqaiq, operated by Saudi giant Aramco, is the world’s largest processing plant.

The attacks started a series of fires that took out nearly half of Saudi’s oil production — 5% of the global daily output.

Two Saudi sources familiar with the kingdom’s oil operations tell CNN that restoring production to its pre-attack levels “will take weeks, not days.”

“This is unprecedented in scale, and impact,” according to both sources.

A senior official told CNN that 19 Saudi targets were struck in Saturday’s attack, drawing on commercial satellite imagery shared with CNN.

Who is responsible for the attack?

Yemen’s Houthi rebels claimed responsibility for the attack, saying they conducted the strikes — using 10 drones — in retaliation for Saudi Arabia’s military campaign against the group in Yemen.

A spokesman for the Houthis also said: “We promise the Saudi regime that the next operation will be wider and more painful if the blockade and aggression continues.”

The US has cast doubt on the Houthi statement, placing blame on the group’s benefactors, Iran, instead.

Secretary of State Mike Pompeo says there is “no evidence the attacks came from Yemen.”

A US official pointed to the angle at which Saudi oil facilities were attacked, the number of points of impact and other information to argue that it is unlikely the attacks were carried out from Yemen.

“You can’t hit 19 targets with 10 drones like that,” the US official said.

Instead, the official suggested the attack most likely originated in southern Iraq or Iran.

Iran supports and arms a coalition of armed groups in Iraq known as the Popular Mobilization Units.

Iraq’s government has denied that the country was used as a launching pad for the attacks.

Saudi Arabia has not yet placed blame on any party for the attack.

What has Iran said?

Iran has denied responsibility for the attack. The country’s Foreign Minister Javad Zarif dismissed Pompeo’s accusations as part of a “max deceit” campaign.

“Having failed at ‘max pressure’, @SecPompeo’s turning to ‘max deceit’,” Zarif wrote in a tweet. “US & its clients are stuck in Yemen because of illusion that weapons superiority will lead to military victory.”

In response to the US statements, a senior Revolutionary Guards commander told Iranian semi-offical news agencies that Iran was ready for “full-fledged” war.

“All American bases and their aircraft carriers in a distance of up to 2,000 kilometers around Iran are within the range of our missiles,” the semi-official Tasnim news agency quoted Commander Amirali Hajizadeh as saying.

How has the US responded?

US President Donald Trump has raised the spectre of a military response to the attacks. On Sunday evening, he tweeted that the US has “reason to believe that we know” who is responsible for the strikes, adding that the country is “locked and loaded depending on verification.”

“Saudi Arabia oil supply was attacked. There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!” Trump said.

Trump used similar language in June when he announced he had called off an attack on Iran just as the US was “cocked & loaded” to strike, because he decided it would cause too many deaths to be a proportionate response to Tehran’s downing of a US drone.

Will fuel prices go up?

Oil prices have spiked after the Saudi attack, though the long-term effects on the market are less clear.

Brent crude futures, the international benchmark, rose by as much as 19.5%, to $71.95 a barrel, the biggest intra-day jump since the start of the 1991 Gulf War. It later dropped by 10%.

Saudi Arabia is the world’s biggest oil exporter.

The US has tried to offset the effects of the kingdom’s supply disruption by promising to draw on the country’s emergency reserve.

In a series of tweets, Trump said he had ordered that oil from the Strategic Petroleum Reserve, or SPR, be used “if needed.”

He said he would use enough oil “to keep the markets well-supplied.”

The attack has exposed the vulnerability of Saudi Arabia’s energy operations, which account for over 40% of the country’s GDP. It may have a long-term impact on the kingdom’s desire to take the state-owned oil giant, ARAMCO, public.

But the long-term impact on global oil markets will depend on how quickly Saudi Arabia can restore operations in the damaged facilities.

“A small $2-$3 per barrel premium would emerge if the damage appears to be an issue that can be resolved quickly, and $10 if the damage to Aramco’s facilities is significant,” said Ayham Kamel, from research and consulting firm Eurasia Group.

Others told CNN Business they believe prices could jump even higher because of the amount of Saudi oil affected by the attacks.

The-CNN-Wire

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