At the weekend there was a drone attack in Saudi Arabia on the largest worldwide oil refinery („Abkaik“) and the oil field („Khurais“). The state-owned company Aramco then reported a production loss of 5.7 MMBD, which is about half of the kingdom’s total production and about 5 percent of the world’s oil supply. In the history of oil, there was no such event in the history of production loss. Even the war in Iraq and the Iranian Revolution had less influence on oil production. The price of oil rose sharply due to the news and peaked at over USD 70. In the course of the day, however, the price fell noticeably and currently stands at around USD 66.
It is to be expected that a) Aramco will be able to restart a good portion of production in a few days and b) the inventories of the state-owned company will be sufficient to meet customer obligations. A „force majeur“ (delivery failure due to an unforeseen event) can therefore be averted in all probability. In addition, Saudi Arabia can temporarily compensate for production shortfalls thanks to high oil inventories. In total, over 100 million barrels of oil are stored in the Kingdom. The stocks were last tapped in 2011 during the Libyan civil war. The International Energy Agency also sees no scarcity catalyst in the current events, as global oil stocks are still adequate. Therefore, the current price reaction is likely to be exaggerated.
We believe that the global crude oil market will be able to cope with the Saudi production shortfalls if they are not permanent. However, Saudi oil plants have so far been regarded as very safe. In our opinion, the perception of the market will change here. As a result of the geopolitical tensions in the Gulf region, it cannot be ruled out that such incidents may continue to occur. This and possible counter-reactions could further dampen international sentiment, which could further weaken the propensity to invest.