Oil prices dropped nearly 5% after a top Saudi Arabian source said that production could be fully back on line within weeks, quicker than initially thought following weekend attacks that halved the kingdom’s output.
Saturday’s attacks raised the spectre of a major supply shock in a market that, recently, has been preoccupied with demand concerns and faltering global growth. Oil surged as much as 20% at one point on Monday.
Production could be fully online within two to three weeks and the kingdom was close to restoring 70% of the 5.7 million barrels per day lost after the attacks, a top Saudi source briefed on the latest developments said.
Brent crude futures plummeted 4.8%, to $65.72 a barrel, while West Texas Intermediate (WTI) crude fell 4.6%, to $59.99 a barrel. Both benchmarks earlier sank more than 6%. In the immediate fallout from the attacks, State-owned producer Saudi Aramco told some Asian refiners it would meet its oil commitments, albeit with changes, sources said.
“We need a proper damage assessment, we need to see a recovery plan. Before that, we don’t really know how much oil will be offline for how long and that’s the basic question people haveing been posing since Saturday,” said Samuel Ciszuk, founding partner at Stockholm-based ELS Analysis.
The attacks on crude-processing facilities at Abqaiq and Khurais resulted in the largest single supply disruption in half a century, and threw into question Saudi Arabia’s status as supplier of last resort.
Some Asian refineries are expected to receive their allocated volumes for October, while other importers are being told of delays or being offered alternative grades.
The prospect of releases from strategic oil reserves in the US, and other industrialised countries that the International Energy Agency advises, such as Japan, have weighed on prices, but the geopolitical threat of retaliation is causing concerns.
Saudi Aramco is pressing on this week with banker meetings about its planned stock market listing. Saudi Arabia recently accelerated plans for the IPO, naming a new chairman for Aramco and mandating nine banks in top roles.