Oil Markets Are One Outage Away From Crisis

The supply disruptions in the oil market may not be over, despite volatility and prices easing in the days after the Abqaiq attack. The repairs at the Abqaiq processing facility are on an extremely tight timetable. According to Bloomberg, Saudi Aramco had about 50 million barrels in storage within the country prior to the attack, plus around 80 million barrels at ports around the world (although not all of that is usable). Aramco is determined to keep export levels from falling, choosing to draw down inventories to keep shipments unaffected. It is also opting to slash refining throughput by about 1 million barrels per day (mb/d), which will cut into product exports but will free up crude. One other strategy is to start up production at some offshore fields. But Aramco vowed to make repairs and bring Abqaiq processing back to pre-attack levels by the end of September, which, at this point, is less than two weeks away. If repairs take longer, then there will be increased scrutiny on Saudi inventories, and any interruptions to buyers would have global impacts. “They probably have about one month of inventories,” Amrita Sen of Energy Aspects told Bloomberg...MORE