What the attacks on Saudi Aramco mean for oil prices

Monday, 16 Sep, 2019

According to preliminary estimates, the explosions led to the interruption of a quantity of crude oil supplies estimated at 5.7 million barrels, or about 50 percent of the company's production.

Aramco gave no timeline for output resumption.

He reiterated that the only way to end the crisis in Yemen and establish calm in the region is to halt the Saudi-led coalition's attacks and invasion, cut off the Western political and military support for the aggressors, and try to find political solutions. The president then tweeted "Saudi Arabia oil supply was attacked" and the U.S.is "locked and loaded" pending verification from Saudi Arabia as to who was behind the attack. According to insiders, the return to full oil capacity will take "weeks".

Saudi Arabia is the world's biggest producer of crude oil and contributes to 10% of world production.

Meanwhile, Credit Suisse said that even before Saudi's supply disruption, global oil markets were poised for a tighter second half of 2019.

Oil-rich Kuwait also said it would increase security around the country's "vital sites" over the attacks.

"Saudi Arabia oil supply was attacked", Trump tweeted. Iran, under U.S. sanctions on its oil industry, has denied any involvement.

Both indices pared record gains after US President Donald Trump revealed that he had approved the release of oil from the United States Strategic Petroleum Reserve if needed.

However, Michael Tran, managing director of energy strategy at RBC Capital Markets in NY, said: "Even if the outage normalises quickly, the threat of sidelining almost 6% of global oil production is no longer a hypothetical, a black swan or a fat tail".

The Associated Press reported that "the USA released new evidence to back up its allegation that Iran was responsible for the assault amid heightened tensions over Tehran's collapsing nuclear deal".

Saudi's energy minister said Saturday officials are "working to recover the lost quantities" of oil and will update the public within two days.

What are the oil markets doing?

The oil price has surged.

Saudi Aramco will likely buy significant quantities of gasoline, diesel and possibly fuel oil while cutting liquefied petroleum gas exports.

Amateur video of the middle-of-the night attack on the Saudi Aramco facilities in Abqaiq, in eastern Saudi Arabia, showed several blazes raging.

Yemen's Iran-backed Houthi rebels have claimed responsibility, but the USA has accused Iran of launching the assault.

White House adviser Kellyanne Conway said the attacks on Saturday "did not help" prospects for a meeting between the two leaders during the United Nations General Assembly this month but she left open the possibility it could happen. Tehran ruled out talks until sanctions are lifted. While no one immediately claimed responsibility for the attack, media reports state that Yemen's Houthi rebels have claimed responsibility for the drone attacks. Pompeo said Tuesday that Trump was "prepared to meet with no preconditions".