Saudi attacks, supply risk could weigh prices at $ 80 / b: S & P Global Platts Analytics

Strong points

Saudi Arabia is likely to maintain its exports and use its short-term reserves

Reserve capacity may be threatened by a direct and serious offensive

Attacks on the Abqaiq treatment facilities in Saudi Arabia and the Khurais oil field will likely push oil prices up to over $ 70 / b and could reach $ 80 / b, analysts said on Saturday. S & P Global Platts Analytics.

"The sudden change in geopolitical risk justifies not only the elimination of the 5-10 $ / b reduction on bearish sentiment, but adds a possible reserve capacity," analysts wrote. "As such, prices are likely to fall out of the range of $ 55 to $ 65 / b, more likely to test the high cap of $ 70 / b previously forecast, if not higher."

They wrote that any additional risk premium "could ensure that prices reach 80 USD / b while Saudi Arabia today asserts that production and exports will not be significantly affected" .

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On Friday, NYMEX's benchmark crude fell 24 cents to $ 54.85 / b, while ICE's Brent fell 16 cents to 60.22 / b.

Analysts at Platts Analytics have written that with estimated disturbances of 5 million b / d of attacks, Saudi Arabia would probably be able to maintain its exports and use its reserves in Japan to ensure security of supply . If the disruption continues, they write, OPEC's unused capacity will be "heavily" affected, as will the International Energy Agency's ability to exploit strategic oil reserves. to deal with a possible shortage of supply.

The attacks could however assume more importance for the market "of an alarming level of efficiency and sophistication, and more importantly, a change of tactics for an offensive more direct and serious, "they wrote.

Platts Analytics estimates that global reserve capacity is currently 2.3 million b / d, but more than 1.6 million b / d is in Saudi Arabia, which shows how vulnerable the market is to risk related to the offer.

"This should make the markets particularly nervous given the uncertainties in Yemen, Iraq, Libya and elsewhere," they wrote. "Moreover, given the fuel mix of regional and sectarian rivalries, economic tensions, large youth populations and a lingering jihadist presence in the Middle East, the next disruptive conflict could be a matter of time."

Platts Analytics has written that demand-side concerns have resulted in a relative instability of potential instability in the Middle East.

"With an apparent limitation of rising oil prices, the funds maintained a long short stance on the CFTC, which weighed on the market," they wrote. "This could change after the attacks today."

Saudi Arabia confirmed Saturday night the temporary loss of 5.7 million barrels of oil production after attacks from its facilities, but said exporters would continue to be supplied from stocks.

"Work is underway to restore production and an update will be provided in about 48 hours," said Amin Nasser, CEO of Saudi Aramco, in a statement sent via email on Saturday.

The drone attacks set fire to oil facilities in Abqaiq and Khurais on Saturday. Located in the eastern province of the Kingdom, the Abqaiq factories process about 7 million b / d of crude, which corresponds to almost all of the country's exports. Khurais, located about 250 km southwest of Dahran, is the second largest oil field in Saudi Arabia. It is able to pump about 1.5 million b / d of light crude, mainly Arabs.

– Brian Scheid, [email protected]

– Andy Critchlow, [email protected]

– Edited by Christopher Newkumet, [email protected]