World oil price could rise by $10 per barrel after ten drones attacked one of Saudi Arabia’s largest oilfields in Hijra Khurais and the world’s biggest crude processing facility at Abqaiq on Saturday forcing Saudi to cut output in half.
Drones attack has caused a loss of 5.7 million barrels of crude production a day or 50% of the kingdom’s oil output. Exact price impact will depend on the repair time which can take weeks to months.
According to CNBC, Saudi Aramco President and CEO Amin Nasser said nobody was hurt in the attacks and emergency crews have contained the fires and brought the situation under control.
“Work is underway to restore production and a progress update will be provided in around 48 hours,” Nasser said.
CNBC quoted Kevin Book, head of research at Clearview Energy, saying “Our baseline assumptions, which incorporate public assessments of strategic petroleum reserve capacity and OPEC spare capacity, imply a net shortfall of ~1 MM bbl/d, or at least a ~$6/bbl premium to the ~$60 Brent close,” Book said in a note. “Exclusive of this supply offset, and assuming a three-week shutdown, our models imply ~$10/bbl of upside.”
Saudi Energy Minister Abdulaziz bin Salman said Saturday the kingdom will compensate part of the production to its customers from its reserves.
Yemen’s Houthi rebels have claimed responsibility. Houthis have been behind a series of attacks on Saudi pipelines, tankers and other infrastructure.
“…if Abqaiq kills talks of easing sanctions and the discussion turns to retaliation and escalation, I think oil could easily trade higher by $10 or more.”, said Bob McNally, president at Rapidan Energy Group, to CNBC.
