Oil Supplies Adequate, Despite Attacks on Saudi: IEA

Following the attack on two Saudi oil facilities that took 5.7mn barrels/day – more than a twentieth of the world's demand – out of Saudi Arabian production September 14, the Paris-based International Energy Association said later that day there were adequate commercial stocks of crude to meet global demand.

The IEA said also that it was monitoring the situation in Saudi Arabia closely and that it was in contact with the Saudi authorities as well as major producer and consumer nations. 

State-owned oil production monopoly Saudi Aramco, which has been planning to launch an initial public offering this autumn, said September 14 that "emergency crews contained fires at its plants in Abqaiq and Khurais, as a result of terrorist attacks with projectiles. These attacks resulted in production suspension of 5.7mn barrels/day of crude."

Abqaiq is home to the world's largest oil processing facility and crude oil stabilisation plant, and Khurais is an oil field, the country's second largest. Iran-backed rebels in Yemen claimed responsibility, but the US was quick to pin the blame directly on Iran, which denied involvement.

Saudi Aramco CEO Amin Nasser visited the two sites and said: “We are gratified that there were no injuries. I would like to thank all teams that responded timely to the incidents and brought the situation under control. Work is underway to restore production and a progress update will be provided in around 48 hours.” That would be late in the evening of September 15, UK time, although there was no update at time of press (22.10 BST).

As well as its local storage, the world's largest oil company Saudi Aramco holds stocks overseas. However, market sentiment might add a risk premium that will drive prices much higher despite that cushion, a number of analysts commented over the weekend. Higher crude prices will effect some gas contracts as well, depending on the duration of any spike.

Crude prices closed September 13 at $60.2/barrel for the North Sea-based dated Brent, which was some $5.4/barrel above the US West Texas Intermediate equivalent. 

If investors value the company at the hoped-for $2 trillion, the 5% sale would bring in $100bn to balance Saudi Arabia’s books and to diversify its energy mix. The drone attacks show the vulnerability of the company's core assets.