“This attack has material implications for the oil market, as a loss of 5 million bpd of supplies from Saudi Arabia cannot be met for long by existing inventories and the limited spare capacity of the other OPEC+ group members. A geopolitical risk premium will return to the oil price.”
Wood Mackenzie research director, Vima Jayabalan, has also commented:
"Abqaiq and Khurais are main processing centres for Saudi Arabia's Arab Extra Light and Arab Light crude oil.
"China, South Korea, Japan and India are the biggest takers in Asia, with China and Japan leading the pack at an average of 900 – 1100 kilo barrels per day each. India could be most exposed as its reserves are the least. China has SPR (Strategic Petroleum Reserve) and commercial crude storage, while Korea and Japan have IEA reserves to fall back on.
"Collectively, Asian demand for Saudi Arabian crude is around 5 million bpd; accounting for almost 72% of Saudi Arabia's crude exports. Asian consumption of Arab Extra Light and Arab Light grades alone from the affected facilities varies between 2.5 and 2.7 million bpd seasonally. The region's dependence has increased significantly over the last 1.5 years.
"The impact and the next course of action will depend on the duration of the outage. Saudi Arabia has enough reserves to cover the shortfall over the next week, but if the outage extends, then filling the gap with the right type of crude quality could be a challenge. Moreover, OPEC+ output cut predominantly consists of medium and heavy sour crudes.
"In terms of refining and petrochemicals, the spike in crude oil prices will dent margins further.
"A prolonged outage and/or further upside above-ground risks in the near term could have an impact on the preparation ahead of the IMO marine bunker specifications change, but at the moment it is still early days to assess."
Read the article online at: https://www.oilfieldtechnology.com/special-reports/17092019/wood-mackenzie-comments-on-saudi-oil-facilities-attack/