ENERGY

Attacks on Saudi oil facilities to affect petrochemical sector

The attacks have caused a significant reduction in feedstock supply for Saudi Arabian petrochemical firms. (File photo: Reuters)

Saudi Arabian petrochemical companies will likely feel the impact of Saturday’s attacks on Saudi Aramco’s oil processing facilities in Abqaiq and Khurais, according to Al Rajhi Capital, the investment banking arm of Al Rajhi Bank.

“We expect Saudi companies to operate at lower production rates for next few days, translating into approximately five days of production loss, which could impact production by around five percent this quarter and probably incur some additional costs,” said Al Rajhi Capital in a research note.

Larger industry players, such as Saudi Arabian Basic Industries Corp. (SABIC), may be able to mitigate this production loss because they can redistribute available feedstock inventory, according to Al Rajhi Capital’s analysis.

However, Al Rajhi Capital revised down SABIC’s estimated earnings for Q3 and 2019. The firm is estimating an earnings hit of 235 million riyals ($62.67 million) for SABIC in Q3, and a 2.3 percent drop on 2019 earnings.

Other major Saudi petrochemical companies are also estimated to experience a drop in 2019 earnings, ranging from 1.7 to 4.2 percent.

The attacks on the oil facilities interrupted the supply of an estimated 5.7 million barrels of crude per day - around five percent of global supply - and two billion cubic feet of gas.

The strikes have been claimed by the Iran-backed Houthi militia in Yemen. However, the scope and precision of the drone attacks show they were launched from a west-northwest direction rather than from Yemen to the south, senior US administration officials said on Sunday.

Oil prices have surged in response to the attack. Saudi Arabian authorities have pledged to use the Kingdom’s oil reserves to compensate for any disruption in supply to its customers.
 

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Last Update: Monday, 16 September 2019 KSA 13:48 - GMT 10:48
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