Saudi Oil Facilities Attack: Limited Impact on Oil Prices Despite Disruptions

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With the global demand forecasts being revised downwards on the back of trade wars and economic downturn, the impact on oil prices is expected to be limited unless further clarity on the extent of damage indicates a significant impact on Saudi Arabia’s production and exports.

Following the reported attacks on the Saudi oil processing facility at Abqaiq and the production facility at Khurais on 14th September 2019, Refinitiv Oil Research issued a media advisory on the current state of events and the potential disruption to the oil markets.

Disruption to the oil market:

According to the official statement released on Saudi Aramco’s website, the attack on its facilities in Abqaiq and Khurais were “A result of Terrorist attacks with Projectiles”, which resulted in a production suspension of 5.7 million bpd of crude oil. According to the last Reuters OPEC survey, the kingdom produced 9.63 million bpd of crude oil in August 2019. This results in almost 60% of the production being suspended due to the attack.

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According to Aramco, the Abqaiq facility is the largest crude oil stabilization plant in the world which processes more than 7 million bpd of crude. Considering the plant plays a vital role in removing the sulphur impurities and reducing the vapor pressure of the crude in order to make it safe for being transported by tankers, exports from the Kingdom’s main terminals of Ras Tanura and Juaymah could be expected to have an impact. This is already seen in the number of ships that have lined up at the port’s waiting anchorage, which have increased from just 5 ships waiting to load on Thursday (12th Sept) as per the port line up to at least 16 VLCC’s waiting as of this morning (15th Sept 2019).

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Refinitiv Oil Research has been informed by port agents that according to the instruction received from Aramco OSPAS (Oil Supply, Planning and Scheduling) department, the vessels at anchorage are still on-hold until further notice, with no additional details being disclosed at this time.

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According to Refinitiv ship tracking data, only 1 VLCC has been berthed in Ras Tanura Sea Island terminals and Juaymah crude terminals since yesterday with all other berths and SBM’s remaining vacant. Refinitiv flows data indicate a year-to-date average of 6.29 million bpd departing from Ras Tanura – this is more than 3 VLCC departures every day from the port. Comparing that to the present line up of ships at the berth, there is expected to be a sharp drop in exports this week. Although the attacks might not have an immediate impact on the crude production, there will certainly be an impact to the exports from the Kingdom if there is an extended delay in bringing the processing plants back in operation.

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However, the impact of this attack on oil prices remain unknown. Considering the attack was over the weekend, any information or updates on the extent of damage would determine the reaction of the market when they open on Monday. But, with the global demand forecasts being revised downwards on the back of trade wars and economic downturn, the impact on prices is expected to be limited unless further clarity on the extent of damage indicates a significant impact on Saudi Arabia’s production and exports.

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