Energy Prospectus

Saudi Arabia Shuts Down About Half Its Oil Output After Drone Strikes

Drone strikes target world's largest oil processing facility, Saudi oil field; attack claimed by Iranian-backed rebels
"The world's largest oil processing facility and a nearby oil field in Saudi Arabia were set ablaze early Saturday morning after reported drone attacks by Iranian-backed Yemeni rebels. The Interior Ministry was quoted by state-run media as saying the fires at the Abqaiq oil processing facility in Buqyaq and the nearby Khurais oil field operated by Saudi Aramco were “targeted by drones
It wasn’t immediately clear if there were any injuries."

"Wall Street Journal reported that the government is shutting down half of its oil output after the drone strikes, which amounts to a loss of about five million barrels a day - or roughly 5 percent of the world's daily production of crude oil. Sources said Saudi Aramco held an emergency board meeting on Saturday to manage the unfolding crisis."

Read more: https://www.foxnews.com/world/drone-att ... ran-rebels

From CNBC: https://www.cnbc.com/2019/09/14/saudi-a ... -says.html
Key points:
> The closure will impact almost five million barrels of crude production a day, about 5% of the world’s daily oil production, the WSJ reported.
> Early Saturday, an oilfield operated by Saudi Aramco, the state-owned oil giant, was attacked by a number of drones.
> Yemen’s Houthi rebels have claimed responsibility for the attack, saying it was one of their largest attacks ever inside the kingdom, the WSJ reported.

MY TAKE: If this attack is tied back to support from Iran the "Stuff Hits the Fan". All hedge funds that now hold short positions on oil are scrambling to see how fast they can cover their positions.

Impact on the price of oil; it could double.

Oil To Hit $100? Half Of Saudi Oil Output Shut After Drone Strikes Cripple World's Largest Oil Processing Facility
https://www.zerohedge.com/geopolitical/ ... lity-saudi

My advice to all of you: Go fill all of your car and truck gasoline and diesel tanks today. Fuel prices will be going up quite a bit next week. If this doesn't add at least $5/bbl geopolitical risk premium to the price of oil then I have no idea what will.

BTW this also reduces the risk of Trump softening the sanctions against Iran to zero.

Wishful thinking from London...

Markets await news from key facilities
Analysis by BBC business correspondent Katie Prescott

Aramco ranks as the world's largest oil business and these facilities are significant.

The Khurais oilfield produces about 1% of the world's oil and Abqaiq is the company's largest facility - with the capacity to process 7% of the global supply. Even a brief or partial disruption could affect the company, and the oil supply, given their size.

But whether this will have an impact on the oil price come Monday will depend on just how extensive the damage is. Markets now have the weekend to digest information from Aramco and assess the long-term impact.

According to Richard Mallinson, geopolitical analyst at Energy Aspects, any reaction on Monday morning is likely to be muted, as markets are less worried about supply than demand at the moment, due to slower global economic growth and the ongoing trade war between the US and China.

However, there are concerns that escalating tensions in the region could pose a broader risk, potentially threatening a fifth of the world's oil supply that goes through the critical Strait of Hormuz.

The only thing that will stop the Houthis from continuing to do this would be a coordinated attack on Iranian oil production. The Saudis must be considering doing so. The Houthis have nothing to lose as long as Iran keeps supplying them with weapons. Nothing else can stop this as the Saudi infrastructure is so vulnerable. I was wondering when the drone war would pick up.
That said, Saudi Arabia does have storage bunkers around the world that are filled, so in the short term the attack may not slow delivery.