Sep 16 | 2019
Record Surge in Oil Prices Seen
Oil prices have spiked by a record 20 percent in intraday trading, following multiple drone attacks on Saudi oil processing plants on Saturday.
Following the spike, prices stabilized to a degree, but the impact is expected to be felt across the industry and will likely heighten security concerns for breakbulk operators serving the oil and gas sector.
“We have never seen a supply disruption and price response like this in the oil market … Political risk premium are now back on the oil market agenda,” said Saul Kavonic, energy analyst at Credit Suisse Group.
Khurais and Abqaiq
Ten drones were reported to have attacked petroleum and gas processing plants in Khurais and Abqaiq on Saturday, with Yemen's Houthi rebels claiming responsibility.
Brent crude briefly topped US$71 per barrel, a sharp rise from US$60 on Friday, as fears over regional conflict grew. President Trump placed the blame with Iranian forces, leading to fears of a military response.
“Saudi Arabia oil supply was attacked … There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!” Trump tweeted.
Light Crude Shortfall
The attack is expected to reduce total Saudi oil output by about 5.7 million barrels per day.
“Abqaiq and Khurais are main processing centers for Saudi Arabia's Arab Extra Light and Arab Light crude oil … The impact and the next course of action will depend on the duration of the outage. Saudi Arabia has enough reserves to cover the shortfall over the next week, but if the outage extends, then filling the gap with the right type of crude quality could be a challenge,” said Vima Jayabalan, research director at research consultancy Wood Mackenzie.
The attack is also expected to have an impact on preparations for the IMO marine bunker specifications change in a few months’ time, potentially disrupting the plans of breakbulk shipping lines to meet the target.
Following the spike, prices stabilized to a degree, but the impact is expected to be felt across the industry and will likely heighten security concerns for breakbulk operators serving the oil and gas sector.
“We have never seen a supply disruption and price response like this in the oil market … Political risk premium are now back on the oil market agenda,” said Saul Kavonic, energy analyst at Credit Suisse Group.
Khurais and Abqaiq
Ten drones were reported to have attacked petroleum and gas processing plants in Khurais and Abqaiq on Saturday, with Yemen's Houthi rebels claiming responsibility.
Brent crude briefly topped US$71 per barrel, a sharp rise from US$60 on Friday, as fears over regional conflict grew. President Trump placed the blame with Iranian forces, leading to fears of a military response.
“Saudi Arabia oil supply was attacked … There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!” Trump tweeted.
Light Crude Shortfall
The attack is expected to reduce total Saudi oil output by about 5.7 million barrels per day.
“Abqaiq and Khurais are main processing centers for Saudi Arabia's Arab Extra Light and Arab Light crude oil … The impact and the next course of action will depend on the duration of the outage. Saudi Arabia has enough reserves to cover the shortfall over the next week, but if the outage extends, then filling the gap with the right type of crude quality could be a challenge,” said Vima Jayabalan, research director at research consultancy Wood Mackenzie.
The attack is also expected to have an impact on preparations for the IMO marine bunker specifications change in a few months’ time, potentially disrupting the plans of breakbulk shipping lines to meet the target.
