ENERGY

Saudi Arabia restores one-third of oil production; oil surges 10 percent

To offset losses, crude carriers being loaded in Saudi Arabia’s Ras Tanura and Juaymah Ports doubled to eight vessels. (File photo: Reuters)

Saudi Arabia has restored a third of its oil production which had been lost as a result of Saturday’s attacks on its key oil-processing facilities, according to Refinitiv tracking data seen by Al Arabiya English.

“On a normal day, around 6.4 million barrels per day (bpd) are shipped out. Since Sunday, only one ship has left, meaning that between Sunday and Monday, only two million bpd have left Saudi ports,” said Ranjith Raja, Lead Analyst – Shipping and Oil Research for Middle East and North Africa at Refinitiv.

However, on Monday, the number of crude carriers being loaded in Saudi Arabia’s Ras Tanura and Juaymah ports doubled to eight vessels, demonstrating Saudi Aramco’s seriousness about offsetting losses, Raja told Al Arabiya.

In normal circumstances, there are usually three to five vessels loading in the Ras Tanura and Juaymah ports, he added.

Oil surges

Meanwhile on Monday, Brent Crude futures jumped 12 percent, or $8, to $68 a barrel about one hour into trading. As of 7:00 a.m. EDT, it found its level at $66.54, up 10.49 percent, or $6.32.

“In the short-term, oil prices are likely to rise - as we have already seen in trading on Asian and European markets. However, the jump seems contained within the $10 mark, and I would not be surprised to see prices come down as output comes back online,” said Ellen R. Wald, Senior Fellow at the Washington-based Atlantic Council’s Global Energy Center.

“Some analysts initially predicted significant long-term impacts on oil prices. However, I do not see this as a likely consequence; $100 per barrel oil as a direct result of these attacks is not a likely scenario,” she added to Al Arabiya English.

Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman confirmed, just hours after Saturday’s attacks, that the Kingdom would use its vast inventories to partially compensate for lost production.

US Secretary of Energy Rick Perry on Sunday also authorized the use of the Strategic Petroleum Reserves to offset any global losses. He accused Iran of the attack on Saudi Arabia, adding that it was an “attack on the global economy and energy markets.”

However, despite America's readiness to offset losses, it is not likely that consumer nations will need to tap into their reserves following the attack on Saudi, analysts and industry insiders told Al Arabiya English.

“This announcement is clearly intended to calm markets and prevent speculation from causing wild swings. In fact, the US already has Strategic Petroleum Reserves released planned for October,” said Wald.

“This is a congressionally mandated sale and has been in the works since August ,” she said referring to Perry’s announcement.

“Aramco plans to fulfill all customer orders with stored oil, so we are unlikely to see consumer nations tapping into strategic reserves,” added Wald.

As the attacks happened

On the day of the attacks, which took place around 4 a.m. AST on Saturday, nine crude carriers — only partially filled — left their loading docks, according to Refinitiv’s tracking data. Saudi Aramco had turned the ships away from the scene of the attack as a standard precautionary measure.

One of the facilities hit is located in Abqaiq, near Dammam in the Kingdom’s Eastern Province. The other facility is in the Hijrat Khurais oilfield.

As an oil-processing facility, Abqaiq is also where Saudi Arabia stores strategic crude reserves.

“This is the heartland of the operations,” said  Raja from Refinitiv, adding that the damage to Abqaiq — had it not been contained — could have also delayed Saudi Arabia’s capacity to tap into its reserves in order to offset production loss.

The attacks resulted in the halt of an estimated 5.7 million barrels of crude oil supplies, or about 50 percent of Aramco’s production, Energy Minister Prince Abdulaziz had confirmed on Sunday.

In August, Saudi Arabia produced 9.85 million bpd, according to official figures from the US Energy Information Administration. The world’s top oil exporter kept its crude production below its output target of 10.3 million bpd under the OPEC-led global oil reduction agreement, which seeks to reduce inventories and support prices.

However, with the Kingdom now pumping only two million bpd, compared to its average of around 6.4 million bpd, global markets and consumer nations could be affected.

If the reduction of Saudi Arabia’s oil production persists, Asia is likely to be the hardest hit, as the Kingdom’s ability to maintain exports to the Far East region will begin to suffer, energy and commodities information provider S&P Global Platts said in a note on Monday.

“The events in Saudi Arabia have ratcheted up tensions in the Middle East to a new level, raising concerns about supply security,” said Chris Midgley, global Head of Analytics, S&P Global Platts.

“While in the short term the direct physical impact on the market might be limited, this should move the market away from its bearish macroeconomic cycle and raise the risk premium in the market as funds reduce their short positions,” he explained.

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, said senior US administration officials on Sunday.

 -Rima Najjar contributed to this article.

SHOW MORE
Last Update: Monday, 16 September 2019 KSA 20:32 - GMT 17:32
Top
BREAKING NEWS

Send to a friend

Close
Saudi Arabia restores one-third of oil production; oil surges 10 percent
Friend's name:
Friend's Email:
Sender's name:
Sender's Email:
Captcha Code
How are we doing?
X

How are we doing?

Name Name *
Email Email *
Country Country
Message Message *
Maximum 550 words allowed