In This Article:
* US building coalition after Saudi attack, Iran warns against war
* Return to full Saudi capacity pledged by end of November
* Global spare capacity extremely low
* United States to impose more sanctions on Iran (Adds settlement prices)
By Collin Eaton
HOUSTON, Sept 19 (Reuters) - Brent crude oil prices rose more than 1% on Thursday on fears of longer-than-expected supply shortfalls following Saturday's attacks on a key Saudi Arabian oil processing facility and escalating tensions in the Middle East.
Global benchmark Brent settled 80 cents, or 1.3%, higher at $64.40 a barrel, while U.S. West Texas Intermediate (WTI) crude pared earlier gains and ended largely steady at $58.13 a barrel, just 2 cents firmer.
Saturday's attacks knocked out around half of Saudi Arabia's crude production and severely limited the country's spare capacity, a cushion for oil markets in any unplanned outage. Tensions have escalated as the United States and Saudi Arabia blamed the attacks on Iran.
"The Saudi oil industry could be threatened again and we could see more supply disruption from the Persian Gulf," said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut.
"What's hanging over the market's head is the response that may be coming. How will the U.S. and Saudi Arabia respond to this?" he said.
Saudi Arabia, the world's leading crude exporter, has said the crippling attacks on its oil sites were "unquestionably sponsored" by regional rival Iran.
The United States said it was building a coalition to deter Iranian threats after the Sept. 14 attack, while the U.S. military said it was consulting with Saudi Arabia on ways to mitigate threats from the north, which U.S. officials also blamed on Iran.
Billions of dollars spent by Saudi Arabia on cutting edge Western military hardware mainly designed to deter high altitude attacks proved no match for low-cost drones and cruise missiles used in a strike that crippled its giant oil industry.
U.S. President Donald Trump said there were many options short of war and added he had ordered the Treasury to "substantially increase sanctions" on Tehran. Iran has denied involvement in the strikes and warned Trump against being dragged into war.
U.S. Secretary of State Mike Pompeo has described the weekend strike as an act of war. He said Washington has been discussing possible retaliation with Saudi Arabia and other Gulf allies but wanted a peaceful resolution.
"We are still striving to build out a coalition in an act of diplomacy while the foreign minister of Iran is threatening all out war and to fight to the last American," Pompeo said. "We're here to build up a coalition aimed at achieving peace."