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Oil prices have already pulled out of their wake following drone attacks on Saudi Arabia's oil infrastructure last weekend. This led some to say, "You see, it's a big burger nothing."
I believe that they are seriously missing the point and underestimate the implications.
These attacks are unprecedented in the history of the global oil industry. These attacks against one of Saudi Arabia's largest oil fields and the world's largest crude processing facility in Abqaiq have sidelined a total of 5.7 million barrels of oil production per day .
It is the biggest oil disturbance of all time. He dismissed the equivalent of the development of shale oil; more than the equivalent of the entire reserve oil production capacity in the world.
But after 24 hours, this mother of all the attacks against the oil infrastructures was even more fashionable on Twitter.
For me, this means that most people do not like the seriousness of this situation. In fact, people tell me that we are no longer so dependent on Saudi oil. Therefore, it should not affect us much in the United States.
These feelings are understandable, but they are not realistic. It is true that we import much less oil from Saudi Arabia. At the beginning of the shale oil boom, we imported about 1.5 million barrels of dj by Saudi Arabia. In 2018, we imported 900,000 BPD from the Kingdom, which represents just under 10% of our crude oil imports.
But oil markets are global and Saudi Arabia is the largest oil exporter in the world. They have long exercised a stabilizing influence within OPEC, ensuring a good supply of global oil markets. The Saudi oil industry enjoys an invulnerability against its oil industry. This type of attack was not supposed to be possible. Related: Shale oil prices in the United States have suffered a surge after the Saudi oil bombings
This air of invulnerability was broken as a result of these attacks. It is not a disruption of a few hundred thousand barrels a day in a war-torn country. That's millions of barrels a day from one of the largest and most stable oil producers in the world.
As Reuters recently pointed out, the physical impact will not be felt for a few weeks. For now, crude oil stocks will be reduced. Oil importers will fight to secure their supplies. Prices would certainly increase, and they did. In the first session following the attacks, crude oil prices recorded the largest jump in a single day in history.
But Saudi has promised to quickly restore lost production, which seems to have quieted the oil markets.
This incident will certainly remind us of the vulnerability of the world's oil reserves. It should reintroduce a fear premium into the oil market. The ultimate impact on the price of oil will be determined by the speed with which Saudi Arabia can restore production. If such a major blackout continues, it is not out of the question for oil prices to plunge another $ 100 a barrel. But if Saudi Arabia recovers its production quickly, the market will probably forget it until the next incident. We have no historical experience to draw upon, because the world has never experienced such a breakdown.
Oil producers who can increase their production. US producers will particularly benefit from this sudden worldwide disruption. The stocks of many American oil companies are trading at double digits, as they are suddenly faced with prospects for much better oil prices.
But do not be deceived. Although most people do not pay much attention to geopolitical events, this is a major problem in the oil markets. This could have far-reaching consequences for the future, as it may be only the beginning of a serious escalation involving the largest oil producer in the Middle East.
By Robert Rapier
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