Saudi Arabia’s disrupted oil production may last longer than originally thought, Amrita Sen, chief oil analyst at Energy Aspects Ltd., told Bloomberg on Monday, with full resumption of oil production perhaps not returning for weeks—or even months.
Saudi Arabia, too, is holding a more reserved position that initially thought, believing now that less than half the capacity at the Abqaiq processing plant can be restored quickly, according to Bloomberg sources that spoke on condition of anonymity. One of the longer lead-time items of the restoration are Abqaiq’s stabilization towers that separates out the dissolved gas from the crude oil—a distillation process that sweetens sour crude, if you will.
Just the specialized parts to repair those towers could take months to get. Five out of the 18 stabilization towards were hit, indicating a “very specific, accurate targeting of those particular infrastructures,” Phillip Cornell, former senior corporate planning adviser to Aramco, cited by Bloomberg.
Abqaiq has a capacity of 5.7 million barrels per day of light crude.
To compensate, Aramco is bringing back online previously shuttered oilfields, and it is drawing on its oil reserves to cushion the blow. What can’t be compensated for by cranking up idled fields and siphoning off crude reserves is being satisfied by substituting a heavier grade oil—but all these emergency measures have limits.
Saudi Arabia’s stockpiles are only sufficient enough to last 26 days, according to Rystad Energy, so if the outage were to last “months” rather than days or weeks, customers may actually feel the supply crunch.
The Abqaiq oilfield was attacked on Saturday, for which the Houthi’s have taken responsibility. The United States, however, has placed the blame squarely on Iran.
Oil prices reacted violently to the attack, sending WTI and Brent crude both up more than 14% by mid-afternoon. WTI was trading at $62.59 while Brent was trading at $68.95 at 2:27pm EDT.
By Julianne Geiger for Oilprice.com
