With the Saudis now racing to restore full oil production to normal levels as one Sunday morningheadline noted, the industry is bracing for a potential significant delay in production — given rumors the fires at the facilities struck in the early hours of Saturday may not be fully “under control” as the kingdom was quick to assure hours after the raging explosions — which could translate into oil prices being very high for a long time. Industry sources said it could take weeks to return full production levels to normal.
Following what Yemen’s Houthis claimed was their own successful targeting of Saudi Arabia’s second largest oil field in the Khurais, as well as the sprawling Abqaiq oil processing facility in Buqyaq — described by Aramco as “the largest crude oil stabilization plant in the world” — the Saudi company acknowledged it was forced to slash its output by half, equal to about 5% of world supply, specifically 5.7 million barrels a day of oil production lost. In the meantime, Saudi Arabia’s stock market fell by 2.3% at Sunday’s open.
What will Monday bring? Upon market opening there’s widespread prediction oil will rally by $5 to $10 per barrel, and as we were among the first to note, could eventually hit $100 per barrel — the latter alarming scenario dependent on how slow or fast the facilities can be brought back online.
As Bloomberg detailed, citing insiders familiar with Aramco operations:
Aramco would need weeks to restore full production capacity to a normal level, according to people familiar with the matter. The producer however can restore significant volume of oil production within days, they said. Aramco could consider declaring force majeure on some international shipments if the resumption of full capacity at Abqaiq takes weeks, they said.
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