Baku, Azerbaijan, Sept.17
By Leman Zeynalova – Trend:
The attack on Saudi oil facilities is unlikely to be a disaster for the global economy, Trend reports citing the UK-based Capital Economics company.
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.
“Saudi production might resume quite quickly and even if it doesn’t, the implications for oil prices and developed economy inflation should be limited. But growing tensions in the Middle East are another headwind for the global economy in already uncertain times, and a full-blown conflict could trigger another leg in the global downturn,” said the company.
But there are a few reasons for concern, reads the analysis by Capital Economics.
“First, while rising oil prices would ordinarily benefit the world’s oil producers and offset some of the damage to advanced economies, experience suggests that they are likely to save part of any gain from higher prices. In any case, benefits for some oil producers would have to be set against the severe costs of conflict for others,” said the company.
Second, the company analysts believes that any hit to advanced economy real incomes growth will be coming alongside a drag from slowing employment and wage growth.
“And finally, tensions in the Middle East add to a host of reasons to feel uncertain about the global outlook, including the trade war and Brexit. Such effects already seem to be weighing on investment growth and business confidence in advanced economies. For now, we expect global growth to stabilise at a slow pace rather than weaken further. But a continued escalation of tensions in the Middle East would make us more inclined to forecast a deeper downturn,” said Capital Economics.
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