Aramco Said to Face Weeks Without Majority of Abqaiq Output
Comment of the Day

September 16 2019

Commentary by Eoin Treacy

Aramco Said to Face Weeks Without Majority of Abqaiq Output

This article by Anthony DiPaola, Will Kennedy and Javier Blas for Bloomberg may be of interest to subscribers. Here it is in full:

Saudi Aramco faces weeks or months before the majority of supply from the giant Abqaiq plant is restored after this weekend’s devastating aerial attack, according to people familiar with matter.

Aramco is still assessing the state of the plant and the scope of repairs, but the state oil company currently believes less than half of the the plant’s capacity can be restored quickly, the people said, asking not to be identified before an official announcement. It’s a more pessimistic outlook than Aramco had immediately after the incident, they said.

All eyes are on how fast the kingdom can recover from the weekend’s devastating strike, which knocked out roughly 5% of global supply and triggered a record surge in oil prices. The loss of Abqaiq, which handles 5.7 million barrels of oil a day, or about half of Saudi production, is the single worst sudden disruption to the oil market.

Aramco, the world’s largest exporter, is currently supplying customers from its stockpiles, but is asking some buyers to accept different grades. President Trump has said he’s ready to release oil from the U.S. Strategic Petroleum Reserve to ensure ample supply.

Saudi Arabia is also starting idle offshore fields to replace some of the lost production.

Eoin Treacy's view

Let’s lay out the questions. The first is just how much geopolitical risk is present and has that been under appreciated by markets? The second is the Khurais field is about equidistant from the border with Iraq and Yemen so how did these drones penetrate air space without being intercepted. The third is what is likely to do well as a result of these events?

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