Baku, Azerbaijan, Sept.17
By Leman Zeynalova – Trend:
The attacks on Saudi oil facilities led to a fall of 5.7 million barrels per day of Saudi Aramco's production, a nearly 60 percent fall, Senior Fellow at the Policy Center for the New South (PCNS, Rabat) and at the French Institute for International and Strategic Affairs (IRIS, Paris) Francis Perrin told Trend.
He pointed out that these developments are very important for at least three reasons:
Saudi Arabia is a key country: number 2 for proven oil reserves, third largest oil producer, largest oil exporter and the only country with a big spare production capacity (before the recent attacks).
The facilities targeted last Saturday are key Saudi facilities: it is the Abqaiq oil processing plant, which is the largest in the world, and Khurais, a giant oil field.
These attacks led to a fall of 5.7 million barrels per day of Saudi Aramco's production, a nearly 60 percent fall. It is totally unprecedented. As Saudi Arabia was covering about 10 percent of world oil production, this fall represents almost 6 percent of global oil production.
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.
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.
“Markets reacted strongly to these attacks. At the opening of Asian and European markets oil prices rose by about 20 percent, which is the biggest rise for several decades. Prices fell later in the day but the increase amounted to about $9-10/b (+15 percent) on Monday as compared with Friday,” he said.
As for the risks of disruption and of a lasting rise in oil prices, Perrin noted that to answer this question, it is necessary to wait for the answers to the following questions: how much time will be required to rebuild Saudi Arabia's production capacity? Will the Saudis use their oil stocks (and how much) to maintain a high level of exports? Will some other producing countries increase their oil exports and by how much? Will the International Energy Agency (IEA) decide to use OECD countries' strategic oil stocks? And will there be other attacks on oil facilities, fields and tankers in the Middle East in the near future?
“When oil prices rise - whatever the reasons - the winners are always oil exporting countries (except Saudi Arabia in this case obviously) and oil companies. The main winner is Iran because its exports have been greatly reduced due to US economic sanctions and because it is a way for Tehran to send an implicit message without recognizing any responsibility (Iran totally denied any responsibility in the latest attacks). The message is the following: if you go on sanctioning our country there will be more and more problems for Arab Gulf countries and for oil exports through the Straits of Hormuz and it will endanger the security of oil supplies and the world economy,” the expert concluded.
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