Saudi Arabia sought to reassure the oil market on Sept. 17 that it has the ability to keep customers well-supplied despite attacks on its key facilities, sending crude prices sharply lower and reversing part of yesterday’s spike.

The kingdom’s crude oil production was cut by more than half at the weekend by strikes on its critical Abqaiq oil processing facility and a major oilfield, sending shockwaves through global markets and prices up by as much as 20% on Monday.

People briefed on the extent of the damage at Abqaiq, which processes more than 70% of the kingdom’s normal output, have warned it could take months before full production is restored.

RELATED: 

But oil prices fell sharply on Tuesday, dropping more than 6%, after a report the kingdom was close to restoring more than two-thirds of its lost output and could return to full production capacity by early next month.

Three people close to the Saudi Arabian energy ministry cautioned, however, the report by Reuters, which cited unnamed sources, was optimistic and did not fully account for the severity of the damage at the Abqaiq facility.

One of the people said full repairs were still expected to last until at least the end of October and that the 70% figure included utilizing oil held in storage by the kingdom, rather than a swift resumption of such a high percentage of the lost output.

Another said Saudi Arabia was worried by the extent of the oil price jump on Monday and was trying to calm the market by presenting a rosier outlook, fearing the US and its allies could flood the market with their emergency oil reserves.

Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman is due to give a press conference around 6pm London time this evening, in his first media appearance since the weekend.
Brent crude, the international benchmark, fell as much $4.76 a barrel immediately after the report to $64.24 a barrel, before recovering to near $65.55 a barrel. US benchmark West Texas Intermediate lost $3.40 to $59.50 a barrel.

Comments