Oil Price Spike after Saudi Attack Temporary

Shailaja A. Lakshmi
Monday, September 16, 2019

The drone attack on the world’s largest oil processing facility, Abqaiq in the heart of Saudi Arabia’s oil industry, forced Saudi Aramco to shut in 5.7 million barrels per day (bpd) of crude production, which equates to 7% of the current global crude and condensate production.

Rystad Energy says that oil price spike will be short-lived. Bjørnar Tonhaugen, head of oil market research at Rystad Energy said: “The bullish reaction in oil prices will likely be limited by Saudi Arabia’s vast quantities of crude in storage, estimated to equal roughly 26 days of current crude exports, a large portion of which is at the main export terminal Ras Tanura. The country also has strategic storage facilities in Rotterdam, Okinawa and Sidi Kerir (Egypt).”

The drone attack on the world’s largest oil processing facility, Abqaiq in the heart of Saudi Arabia’s oil industry, forced Saudi Aramco to shut in 5.7 million barrels per day (bpd) of crude production, which equates to 7% of the current global crude and condensate production.

“The world is not even close to being able to replace more than 5 million bpd day of Saudi Arabian exports. The market’s reaction to Saudi Arabia’s importance, in the new era of US shale, will now be put to the test,” Tonhaugen remarked.

The longer the processing facility remains disrupted, the larger the potential impact on actual crude flows will be.

“In a scenario where the damages result in a longer duration of the 5.7 million barrels per day production shut-in, say for 10 days or more, the situation for Saudi Arabian crude flows to the market will be critical, in our view, as there are limits globally to the volume of export replacement barrels,” Tonhaugen remarked. “Strategic Petroleum Reserves in the OECD countries would then be called upon. The US stands as one of the few countries that would be able to increase exports in the short term. We believe US crude exports could potentially be increased by about 1 million bpd, from 3 million to 4 million bpd, if prices allow for higher utilization of the current crude exports capacity. Other countries with available capacity to increase exports by a few hundred thousand barrels per day each include UAE, Russia, Kuwait and Iraq.”

Saudi Arabia has approximately 185 million barrels of crude stocks in storage currently, and has drawn down its domestic crude stockpiles by more than 40% (or 140 million barrels) since 2015. A large part of the storage is located near crude loading terminals, with storage capacity at Ras Tanura estimated at 60 million to 70 million barrels, representing 10 to 11 days of normal crude exports from the terminal

“The global flow of crude oil will not be disrupted immediately, Rystad Energy believes, due to storage capacity at the main export terminals. However, the longer the processing facility remains disrupted, the larger the potential impact on actual crude flows will be,” Tonhaugen added.

Categories: Energy Oil Gas Research

Related Stories

Pandion Energy Divests Interests in Three Norwegian Assets to Inpex

Seatrium Makes First Turnkey FPSO Delivery to Petrobras

KBR-SOCAR Joint Venture Secures Work for BP in Azerbaijan

EnQuest Acquires Harbour Energy’s Vietnamese Assets

Woodside Finds South Korean Partners to Advance LNG Value Chain

Four Jack-Up Drilling Rig Deals Set to Bring In $129M for Borr Drilling

Yinson Production Secures $1.17B Refinancing for FPSO Maria Quitéria

Centrica and Thailand’s PTT Ink Long-Term LNG Supply Deal

Petrovietnam, Partners Sign PSC for Block Off Vietnam

CNOOC Signs Hydrocarbons Exploration and Production Deal with Kazakhstan

Current News

Pandion Energy Divests Interests in Three Norwegian Assets to Inpex

China Starts Production at Major Oil Field in Bohai Sea

Dutch Contractor Completes Malaysia’s Largest 'Rig-to-Reef' Decom Project

China Rolls Out 17MW Floating Wind Turbine Prototype

SBM Offshore’s Jaguar FPSO Enters Drydock in Singapore (Video)

EnQuest Picks Up Offshore Oil and Gas Block in Brunei

CNOOC Finds Oil and Gas in South China Sea

Seatrium Makes First Turnkey FPSO Delivery to Petrobras

KBR-SOCAR Joint Venture Secures Work for BP in Azerbaijan

Baker Hughes, Petronas Team Up for Asia-Pacific Energy Resilience

Subscribe for AOG Digital E‑News

AOG Digital E-News is the subsea industry's largest circulation and most authoritative ENews Service, delivered to your Email three times per week

https://accounts.newwavemedia.com