Over the weekend, drone attacks shutdown output at the Abqaiq and Khurais oil plants, removing 5.7 million barrels per day from the market.
The price of Brent and Texas crude began to stabilize Tuesday (September 17) following an announcement that Saudi Arabia’s Aramco will have oil production back up by the end of the month.
Over the weekend, drone attacks shutdown output at the Abqaiq and Khurais oil plants, removing 5.7 million barrels per day (mbpd) or 5 percent of global supply from the market.
The aerial assault and subsequent production halt caused prices for crude to skyrocket, recording the greatest single day price surge.
At a Tuesday (September 17) press conference in Saudi Arabia, company and government officials assured attendees that production would be fully restored by the end of the month.
“These synchronized attacks were timed to create maximum damage to our facilities and operations,” said Aramco CEO and President Amin Nasser. “The rapid response and resilience demonstrated in the face of such adversity shows the company’s preparedness to deal with threats aimed at sabotaging Aramco’s supply of energy to the world.”
Nasser confirmed that Khurais was only offline for 24 hours, and production at Abqaiq is already up to 2 million bpd. In an effort to shore up any deficit Aramco ramped up output at its sites that were unaffected by the drone attack. Inventories were also drawn upon to prevent a shortage.
“Not a single shipment to an international customer has been or will be missed or canceled as a result of these attacks. We have proven that we are operationally resilient and have confirmed our reputation as the world’s leading supplier,” he said.
A Yemeni rebel group — Houthi — has claimed responsibility for the drone facilitated air raid, however the US and Saudi Arabia remain convinced Iran played a part in the weekend attack.
In a series of tweets, the US leader and Secretary of State Mike Pompeo blamed Iran for the attack and offered Saudi Arabia military support.
In a tweet from Monday (September 16), the Saudi Foreign Minister issued a statement indicating the weapons used in the drone assault were Iranian.
— Foreign Ministry 🇸🇦 (@KSAmofaEN) September 16, 2019
This morning US President Donald Trump took to Twitter to announce he had instructed the treasury department to heighten Iranian sanctions.
I have just instructed the Secretary of the Treasury to substantially increase Sanctions on the country of Iran!
— Donald J. Trump (@realDonaldTrump) September 18, 2019
Iran has adamantly denied that it was behind the attack that removed 5 percent of global oil supply from the market in one fell swoop. Iran has threatened to respond “immediately” if the US launches an offensive against the country.
The attacks couldn’t have come at worse time, as the Saudi oil producer plans to make an initial public offering shortly.
“We have said we are ready and will proceed with the IPO when our shareholder takes the decision,” Nasser added.
Saudi Aramco also has plans to grow its production and refining capabilities in the region, the company recently completed the acquisition process for a 50 percent stake in the SASREF joint venture located in Jubail Industrial City, Saudi Arabia.
Aramco paid US$631 million to Royal Dutch Shell Saudi Arabia (NYSE:RDS.B,AMS:RDSA) for the stake in the JV.
The current price of Brent crude is US$63.25 a barrel, while West Texas crude is selling for US$58.73 per barrel.
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.