Expert: Without spare production capacity of Saudi Arabia, oil market to be in total shock
Baku, Azerbaijan, Sept.25
Without spare production capacity, which is now official, based on Saudi Arabia's statements, the market is expected to be in total shock, expert Cyril Widdershoven told Trend on Wednesday.
Commenting on the economic impacts arising from the recent attacks on Saudi Arabia’s oil facilities, the expert stated that the major problem is the level of viability or resilience of the oil and gas sector worldwide, in case of removal of Saudi oil.
The expert said that the possibility of increase in the oil prices is clear and it only will take one major new incident to have prices spike.
“If assessments are right that Aramco (Saudi Arabian national petroleum and natural gas company) repair will take longer than currently is being stated, prices also will go up,” he said.
Widdershoven noted that the current prices remain at a low level due to Aramco’s positive statements on the repair work and the fact that the company is able to use its crude oil and petrochemical storage volumes to supply the market.
Touching on an impact on Saudi economy resulting from the incident, the expert stressed the scale of an impact is much bigger than currently is currently assessed.
“When, however, real production should become available, the situation will become clear," he noted.
Besides, the expert underlined the negative influence of the attacks on potential investor interests Saudi Arabia. He added that costs of repair are going to increase, as not only repairs need to be arranged, but also new and more applicable security systems.
Regarding the countries which could potentially benefit from tense situation in the oil market, Widdershoven named Iraq, US, Russia, UAE and Nigeria.
Moreover, he emphasized that now is the time to diversify energy supply for several Asian countries that are exporters of the Saudi oil.
"However, they may face some issues on their path to the diversification," he noted.
On September 14, a drone attack targeted Saudi Aramco's Abqaiq and Khurais oil installations, forcing the national oil company to shut them down. This resulted in a more than twofold drop in Saudi Arabia's daily net oil output. Although responsibility for the attack was claimed by the military wing of Yemen's Ansar Allah movement, also known as the Houthis, the United States and Saudi Arabia have put the blame on Iran.
On Wednesday, the Saudi Defence Ministry held a press conference to present what it described as evidence of Iran's involvement in the attacks. Tehran has refuted the accusations.