Will Aramco attacks faze the biggest oil-producing countries?

Washington and Moscow stand ready to buoy oil supplies, after attacks sideline more than half of Saudi's daily output.

    The US, Saudi Arabia and Russia are the three biggest oil producers in the world, respectively, according to the US Energy Information Administration [File: Jessica Lutz/Reuters]
    The US, Saudi Arabia and Russia are the three biggest oil producers in the world, respectively, according to the US Energy Information Administration [File: Jessica Lutz/Reuters]

    Drone attacks on Saudi Arabia's state-owned oil giant, Saudi Aramco, have unleashed heightened tensions in the Middle East and sent energy prices soaring amid concern over global crude supply.

    Saturday's attacks hit vital oil infrastructure in Saudi Arabia, including the world's largest petroleum-processing facility and a nearby oilfield, cutting the kingdom's daily output by more than half.

    On Monday morning, markets reacted sharply to the attacks - for which Iran-allied Houthi rebels in Yemen claimed responsibility - with the weekly opening bell ushering in the biggest leap in oil prices since the 1990-1991 Gulf War.

    Both Brent crude futures and those in the United States soared - rising by more than 19 percent and 15 percent, respectively.

    But talk from US President Donald Trump of tapping strategic reserves to weather any shortfalls tempered the rally, amid warnings that Aramco's return to full oil capacity could take weeks.

    'Spare oil capacity'

    Reassurance over supplies came from elsewhere too, with Russia suggesting there was enough oil in reserve globally to cover any shortage from Saudi Arabia "in the mid-term" and ruling out an immediate increase in production levels.

    Similar mood music emanated from the Saudi-dominated cartel of top oil producers - the Organization of the Petroleum Exporting Countries (OPEC) - with Secretary-General Mohammad Sanusi Barkindo reportedly satisfied the situation was under control.

    Further seeking to assuage nervous markets, Saudi Energy Minister Prince Abdulaziz bin Salman said the kingdom would use its vast inventories to make up for some of the lost production.

    In addition to sidelining some five percent of the world's daily oil output, Saturday's attacks also severely curtail Saudi Arabia's "spare oil capacity" - idled production that can be brought online on short notice and sustained in order to cushion sudden shocks to global oil supplies.

    While the Saudis have long been the gatekeepers of global oil's spare capacity, the US - currently the world's largest oil producer - is coming up fast.

    When accounting for all crude oil, petroleum liquids and biofuels production, the US, Saudi Arabia and Russia are the three biggest producers in the world according to the US Energy Information Administration (EIA).

    US shale oil is relatively more expensive to produce than Saudi oil, but as prices rise, US shale suppliers can ramp up production within months.

    Shale oil output has been so strong this year that the US briefly overtook Saudi Arabia as the world's number-one oil exporter in June.

    US oil production from seven major shale formations is expected to rise by 74,000 barrels per day (bpd) in October to 8.843 million bpd, the EIA said in its monthly drilling productivity report on Monday.

    Before the attack, OPEC had been focusing on boosting adherence to a supply-reduction pact with Russia and other non-members of OPEC.

    SOURCE: Al Jazeera and news agencies


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