Saudi Arabia Grapples With Oil Attack Recove
September 17th, 2019
Reports out of Saudi Arabia are mixed with respect to how long before they have production back online. Some reports have said that most production was coming back on line now and the rest in a few days other reports are saying it will be weeks or months to restore production. Bottom line is there is still a lot of uncertainty around the whole issue. This is a key issue for the market on how long it is going to take to get production back in place. Saudi Aramco have told some Asian customers that they will get their full commitment of supply but some loads for early October may be delayed until later in the month.
The Saudi energy minister will hold a news conference today at 1:00PM EST. Hopefully this will provide some more information on the recovery plan and how long all of this might take. As more information come out this morning it appears that the repairs could take some time. So that news is more supportive to the market, but the press conference later today will hopefully give everyone a better understanding of the situation.
Prices have eased off the highs put in yesterday and are currently trading just a bit lower to start the day as it appears there will be no immediate military response and President Trump has said he does not want to go to war. But the chances for negotiations seem dead from Iran’s stand point as the supreme leader said, “there will be no talks with the US at any level.”
OPEC’s Secretary General, Mohammad Barkindo, discussed the oil market with the head of the IEA, Fatih Birol, on Monday after the attacks on Saudi Arabia’s oil facilities. They expressed their satisfaction that “the situation has been brought under control by the Saudi authorities” and agreed to continue to monitor the market and keep in regular contract over the next couple of days.
Two OPEC sources said that with plentiful global oil inventories and no signs of a shortage yet, OPEC does not need to formally discuss taking any action for nw.
Yesterday oil supply disruption is the largest since the Iraq war which ended 8 years ago. However, the largest damage from yesterday was to an oil processing facility not oil wells or refineries and the fires are now out, Saudi Arabia has stated that they expected to have 1/3 of the production back online late yesterday, which still leaves about 3.7 million bpd off line.
The market is putting in a risk premium as the attack yesterday happened in locations that most thought was protected and safe. That idea has not been turned on its head and the potential for this to happen again is real of I guess possible. Also, as tension in the Middle East on high alert the market must work in that risk premium as well.