September 16, 2019 /08:35PM / By Tsvetana Paraskova of
Oilprice.com / Header Image Credit: Al Jazeera
The attacks on the Saudi oil facilities sparked a massive fire at a crude processing plant essential to global oil supplies. The closure impacts 5 million barrels of crude processing per day, affecting 5 percent of the world's daily oil production.
Terrorist attacks with projectiles resulted in a production suspension of 5.7 million barrels of crude oil per day, Saudi Aramco on Saturday, confirming the loss of more than half of the Kingdom's oil production.
"Work is underway to restore production and a progress update will be provided in around 48 hours," the state-held giant-the world's largest oil company-said in a statement on Saturday, hours after the attacks.
The now high risk premium and the sudden elimination of spare capacity adds a potential US$5-10 premium to oil prices, S&P Global Platts Analytics said, noting that "prices are likely to break out of the $55-65/b options range, more likely testing the high $70/b previously forecast, if not higher."
Additional risk premium "could see prices test $80/b despite Saudi Arabia today claiming production and exports will not be significantly impacted," S&P Global Platts Analytics said on
The attacks have also wiped out the global spare capacity, which Platts Analytics estimates to be 2.3 million barrels per day, with over 1.6 million bpd of this located in Saudi Arabia.
The International Energy Agency (IEA) said in a brief on Saturday that "The IEA is monitoring the situation in Saudi Arabia closely. We are in contact with the Saudi authorities as well as major producer and consumer nations. For now, markets are well supplied with ample commercial stocks."
The expected update from Saudi Arabia and a potential timeline of restoration of production will determine the next move for oil prices.