SMM: Saudi Aramco is increasingly less optimistic about the possibility of a rapid recovery in oil production from the weekend attack, and most of the production capacity of Abqaiq, the company's large crude oil processing plant, may not recover for weeks or months.
The world is watching how soon Saudi Arabia will be able to recover oil supplies from the devastating weekend attack that affected about 5 per cent of the world's crude oil supply and triggered a record surge in oil prices. At the initial stage, it is reported that a large amount of crude oil may begin to resume supply within a few days. Saudi Aramco is still assessing the condition and scope of repairs at the plant, but the company now believes it can quickly restore less than half of its total capacity, according to people familiar with the matter.
"the damage to the Abqaiq facility is more serious than previously thought," said Amrita Sen, chief oil analyst at Energy Aspects Ltd.. "while we still believe that up to half of the interrupted capacity of 5.7 million barrels per day could recover quite quickly, it could take weeks or even months for total production to fully recover."
Abqaiq handles 5.7 million barrels of oil a day, about half of Saudi production. The loss was the worst single event of an oil supply disruption in the oil market. Saudi Aramco is opening idle offshore oil fields to replace some of the lost production, according to a person familiar with the matter. Saudi Aramco is supplying its stockpiles to customers, but some buyers are being asked to accept different grades of crude oil. Rystad Energy A, a consultancy, says Saudi Arabia has enough domestic stocks to meet about 26 days of export demand.
On such a special trading day, London Brent crude oil futures jumped nearly $12 in the first few seconds of trading, the biggest dollar gain since the contract was born in 1988. Oil prices have given up some of their gains, but trading is close to $69 a barrel and is expected to rise at an all-time high. The trading volume of Brent crude oil futures also reached an all-time high.
Long time repair
Phillip Cornell, a former senior corporate planning consultant at Saudi Aramco, said the stabilizer at the Abqaiq plant, which is responsible for separating raw oil and gas compounds, took the longest time to repair. "it could take weeks or months for them to get specialized parts," Cornell said at an Atlantic council meeting in Washington on Monday. "
Cornell said five of the 18 stabilization towers appeared to have been removed, and the published images showed "very specific and accurate targeting of these specific infrastructure".
In addition to the damage to oil supplies, the attack raised the possibility of U. S. retaliation against Iran, which the United States says was behind the incident. Although Iranian-backed Houthi insurgents in Yemen claimed responsibility for the attack, saying 10 drones carried out air strikes, U. S. administration officials said Sunday there was plenty of evidence that Iran was directly responsible.
Us President Donald Trump promised on Monday that the United States would help its allies after the attack on major oil facilities in Saudi Arabia. But he says the United States is no longer directly dependent on oil and gas in the Middle East, and there are few tankers in the region.
A Saudi military official said on Monday that preliminary findings showed that the weapons used in the airstrikes came from Iran, but they did not directly blame Iran for the incident.
Saudi Arabia, which accounts for nearly 1/10 of global crude oil production, has been targeted by sea, land and air this year because of tensions with Iran. Houthi insurgents said on Monday that they would continue to target Saudi oil installations. Houthi television quoted Iranian-backed Houthi insurgents as saying its weapons could reach anywhere in Saudi Arabia.
"whether it takes Saudi Arabia five days or more to restore oil production, the drone strikes over the weekend can lead to the conclusion that Saudi infrastructure is highly vulnerable, and the oil market has been misestimating the risk," Citigroup's Ed Morse wrote in a research note. "
Even if OPEC+ decides to give up production cuts, it can only add about 900000 barrels of oil a day to the market, which is only a fraction of the capacity lost by Saudi Arabia, according to calculations.
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