The oil market seized with uncertainty over lost Saudi production

The attacks, which damaged one of the Saudi flag fields and a key processing complex, triggered one of the wildest periods of trading seen in oil markets, with Brent crude futures rising 19% in a matter of seconds. open Monday before posting their biggest breakthrough ever single. It was a more subdued start to trading on Tuesday, with Brent and West Texas Intermediate futures narrowing lower.

As Saudi state-owned oil producer Aramco grows less optimistic that there will be a quick recovery following strikes that cut domestic production by half, investors are looking for clarity on how bad it could be. Initially, it was said that significant volumes could start flowing again within days, but Saudi officials later told a foreign diplomat that they face a “severe” disruption measured in weeks and months.

“There is a real difference in understanding how quickly that lost production will return to the internet,” Ann Berry, a partner at Cornell Capital LLC, said in an interview with Bloomberg TV. “The initial reaction was that 100% would come back very soon, now the prospect will be much more conservative than that.”

The worst unexpected disruption of global oil supplies continues to respond as geopolitical risk premiums jump to concern over volatility in the Middle East and a possible retaliation against Iran, which the US has blamed for strikes. Traders may not be fully priced at the impact of supply losses, according to Citigroup Inc.

Oil markets are uncertain as to how long it will take for Saudi Arabia to resume production following devastating attacks that destroyed 5% of global gross supply.

The bank said Saudi state-owned Aramco manufacturer lost about 3.7 million barrels a day of production on Saturday after 10 unmanned aerial vehicles struck the Abqaiq facility and the kingdom’s second-largest field in Khurais.

Full recovery may not occur before the end of the year, holding 1 million to 2.5 million barrels per day offline, according to Citigroup. Saudi crude inventories are in a “more critical situation” than originally thought, the bank said.

While Aramco is still assessing the state of the Abqaiq plant and the extent of the repairs, it currently believes that less than half the plant’s capacity can be restored quickly, said people familiar with the matter, who asked not to be identified because the information is not available. public.

Saudi Aramco is firing offshore oil fields – part of the spare capacity pad – to replace some of the lost production, one person said. Aramco customers are also being supplied using stocks, though some buyers are required to accept varying degrees of crude oil. The kingdom has enough internal inventory to cover about 26 days of exports, according to consultant Rystad Energy A / S.

If Abqaiq “takes months to get back online, we could see Brent move to $ 70 to $ 80 per barrel range,” Vivek Dhar, an analyst at Commonwealth Bank of Australia, said in a note. “A vengeance attack on Iran could see oil prices rise even higher.”/

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