DUBAI: About three million barrels per day of Saudi oil will remain out of service for a month, about half of the production halted by the devastating attacks of the weekend at key oil facilities, S&P Platts said Tuesday.
The report came when oil prices fell slightly after record gains on Monday, as uncertainty prevailed in world markets over when the OPEC boss could restore lost production.
The attacks on Abqaiq, the world's largest processing plant, and the Khurais oil field that the United States blamed on Iran have eliminated 5.7 million barrels per day (mbpd), or six percent of world production.
"At this point, it seems likely that around 3.0 million bpd of Saudi Arabia's crude oil supply will be offline for at least a month," S&P Global Platts said in a report.
The Saudi cabinet chaired by King Salman on Tuesday warned that unprecedented attacks pose a threat to the world's energy supply.
"The aim of unprecedented destructive aggression … is to aim primarily at global energy supplies," the cabinet said in a statement.
"We urge the international community to take stronger measures to stop these flagrant attacks," said the statement, quoted by the SPA news agency.
The kingdom emphasized that it was "capable of responding to attacks", regardless of who the perpetrators were, but did not mention any.
But he reiterated previous claims that the attacks were carried out with Iranian weapons.
Challenging
Riyadh pumps about 9.9 million bpd, of which around 7.0 million bpd are exported, mainly to Asian markets.
“Saudi Arabia will probably say that they can fully supply their customers, although as time goes by this can be a challenge. Any indication of delays or lack of supply will lead to greater price increases in the coming weeks / months, "said S&P.
The threat of a prolonged interruption of Saudi Arabia's supply highlights the lack of additional production capacity in the market, estimated at 2.3 million bpd, mostly in Riyadh's hands, the energy news provider said.
Reports said Monday that the kingdom is likely to recover up to 40 percent of lost production immediately, but experts had conflicting views on how long it will take to take production to pre-attack levels.
The crisis revived fears of a conflict in the Tinder Gulf region and raised questions about the safety of oil fields in the world's leading exporter, as well as for other producers.
Capital Economics, based in London, said global crude stocks, estimated at around 6.1 billion barrels, should be able to compensate for the loss of production.
He said that if Saudi Arabia manages to restore total production next week, oil prices would quickly drop to around $ 60 per barrel.
But if it takes months and tensions persist, Brent crude reference prices could reach $ 85 per barrel, he said.
Oil prices sink
Oil prices fell five percent on Tuesday, reversing some of the gains of the previous day, as analysts predicted that Saudi production would recover earlier than expected after weekend drone attacks.
In the span of several minutes in the afternoon in European trade, Brent North Sea crude for November delivery fell from $ 67.75 to $ 65.00. He fell as low as $ 64.24, before recovering a bit.
The market was already trading in negative territory after the record gains of the previous day that were driven by attacks on Saudi facilities that wiped out half of the kingdom's oil production.
"The markets were again mistaken for Saudi news," said Forex.com analyst Fawad Razaqzada in reaction to Tuesday's price drop.
“This time, prices fell due to reports of a return of oil production earlier than expected after the attacks.
“Although small details have emerged, speculators are obviously happy to sell now and ask questions later. And who would blame them after that big gap (price)?
The increase in the price of oil had fueled fears that more expensive energy and geopolitical instability could weigh on a global economy that is already slowing, but a rapid recovery of Saudi exports and a return to previous price levels would ease those worries
"It could be said that the peak of oil on Monday was unsustainable, as concerns over oversupply have been the most dominant issue this year, but the sudden drop came earlier and faster than expected," said Chris Beauchamp , chief market analyst of the online commerce firm IG.
Meanwhile, merchants nervously awaited a new response from the United States after it said Iran was likely to be at fault.
The crisis revived fears of a conflict in the Tinder Gulf region and raised questions about the safety of oil fields in Saudi Arabia, the world's leading exporter, as well as other producers.
"The oil reversal did not do much for global markets. The indices remain worried about what will happen next between Saudi Arabia and Iran, fears that helped undermine the sentiment," said Spreadex analyst Connor Campbell.
The attack on Saudi oil facilities also diverted attention from upcoming trade talks between China and the United States, as well as a long-awaited political meeting of the Federal Reserve, which is expected to reduce interest rates on Wednesday.
Posted on Dawn, September 18, 2019
Source: https://www.dawn.com/news/1505870/half-of-lost-saudi-oil-to-remain-offline-for-a-month-sp