Baku, Azerbaijan, Sept.16
By Leman Zeynalova – Trend:
The current situation cause by the attack on oil facilities in Saudi Arabia may push US players to drill more, Trend reports citing Will Scargill, Managing Oil & Gas Analyst at GlobalData, a leading data and analytics company.
“If the Saudi supply outage is sustained, we may well see a test of how well the US industry can dynamically adapt to market needs. Although the OPEC+ production cuts currently in place mean that the group has spare capacity available, it may not be enough to cover all lost output,” said Scargill.
The expert noted that last week the market’s focus was on further output cuts to balance oversupply, and so there is some level of buffer.
“However, Saudi Arabia had shouldered the largest portion of existing cuts and it is unclear whether all of this previous spare capacity will now be available. If a large portion of the reported 5.7 million barrel per day output loss is sustained for a period of weeks or more, it will be a huge challenge to fill that gap. A period of sustained heightened prices and inventory draw-downs would likely spur US players to drill more. However, their ability to bring swing supply would be put to the test and could be limited by financing and infrastructure constraints,” Scargill explained.
Saudi Arabia’s stock market fell by 2.3 percent at Sunday’s open as the country grappled with weekend drone attacks on the heart of its oil production facilities in Abqaiq and Khurais claimed by Yemen’s Houthi rebels.
Reports that the country may take weeks to return to full oil supply capacity, depending on the scale of the damage.
Half the country’s oil production was halted due to fire damage and an assessment of the situation is due on Monday, Saudi energy ministry officials said. They have not yet offered a timeline on full production restoration.
Abqaiq, in the kingdom’s eastern province, is the world’s largest oil processing facility and crude oil stabilization plant with a processing capacity of more than 7 million barrels per day (bpd). Khurais is the second largest oil field in the country with a capacity to pump around 1.5 million bpd.
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