When Saudi energy minister Prince Abdulaziz bin Salman declared to reporters just three days after a devastating missile attack that state oil company Aramco had risen “like a phoenix from the ashes,” the assembled officials at the press conference cheered. But a week and a half later, as the country’s self-declared Monday deadline rapidly approaches to restore full oil production, traders say the ovation may be premature. Many buyers say they have been assured by Aramco that their contracted supplies will be met this month, but are in the dark about Saudi Arabia’s crude availability for future months.
“I would like to see real evidence that they are going to resume [production] in the coming weeks,” one Middle East oil company official, asking not to be identified, told Platts. Oil field flaring activity detected in satellite imagery indicates Saudi Arabia’s production capacity has returned to normal, according to geospatial intelligence firm Ursa Space Systems. But with significant damage to the Abqaiq crude processing facility still to be repaired, how much of the country’s output is fit for export remains a question, said Ursa analyst Geoff Craig.
Indeed, Saudi Arabia’s crude shipments have dropped sharply in the wake of the attack, according to cFlow, Platts trade flow software, and other tanker tracking services, even with Saudi Arabia cutting its domestic refinery runs and flows to neighboring Bahrain to keep exports up. Market sources have indicated that Saudi Arabia has also sought crude and refined products from other producers to help fill their supply gap. Crude futures spiked close to 20% in the immediate aftermath of the attack, but have since given up almost all of those gains as Saudi officials have leaked reports to media outlets suggesting that repairs could be ahead of schedule.
Traders will be watching closely how Saudi Aramco sets its official selling prices for November crude loadings next week, with many saying it could be a tricky exercise for the company. Already tight heavy crude supplies have been squeezed tighter by the September 14 attacks, which forced Aramco to shut down 5.7 million b/d, or half, of its production capacity. That would seem to indicate a higher selling price for Saudi crude.
But officials are keen to maintain the company’s reputation as a reliable and secure supplier, as they fast-track plans for an initial public offering of Aramco shares under the country’s ambitious economic reform plans. Traders say this could make the company keep any price increase relatively muted, to indicate a quick recovery and no major loss of supply.