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Battered Saudi oil output to recover in two or three weeks

Battered Saudi oil output to recover in two or three weeks
September 17, 2019
LONDON/DUBAI (Reuters) - Saudi Arabia sought to calm markets on Tuesday after an unprecedented attack on its oil facilities, with sources saying output was recovering much more quickly than initially forecast and could be fully back in two or three weeks.
The Saudis were initially silent on the impact of the weekend attack that knocked out half of their production, or 5% of global output, causing the largest oil price jump in decades. But after fears it could take months for output to recover, a top official said on Tuesday the kingdom was close to restoring 70% of the 5.7 million barrels per day lost and production would be fully back in two to three weeks. That sent prices down sharply on Tuesday. The Saudi energy minister will hold a news conference on Tuesday at 1715 GMT, giving what would be the first official update since state oil giant Aramco announced on Sunday the attacks on its plants in Abqaiq and Khurais. The assault on the world’s biggest crude oil processing was the worst on regional oil facilities since Saddam Hussein torched Kuwait’s oil wells during the 1990-91 Gulf war. While the Houthi group, which is fighting a Saudi-led coalition in Yemen, was quick to claim responsibility for the attack, US President Donald Trump blamed Iran. That accusation prompted Iran’s supreme leader on Tuesday to rule out talks with Washington.


Trump said on Monday that it looked like Iran was behind the strike at the heart of the Saudi oil industry, but stressed he did not want to go to war. Iran denied it was to blame. “Iranian officials, at any level, will never talk to American officials ... this is part of their policy to put pressure on Iran,” Iranian state TV quoted Ayatollah Ali Khamenei as saying. He said talks could only take place if the US returned to a nuclear accord between Iran and the West that Trump abandoned last year. US-Iranian relations deteriorated after Trump quit the accord and reimposed sanctions over Tehran’s nuclear and ballistic programmes. He also wants Iran to stop supporting regional proxies, including the Houthis. But after first warning that the United States was “locked and loaded” to respond to the incident, Trump dialled down his rhetoric, saying on Monday there was “no rush” to do so and that Washington was coordinating with Gulf Arab and European states. “We want to find definitively who did this.” Britain and Germany agreed they needed to work with international partners to form a collective response and de-escalate tensions as efforts continued to establish exactly what happened, Prime Minister Boris Johnson’s spokesman said. German Chancellor Angela Merkel said the Iran nuclear pact, which European parties are trying to salvage, is one building block “we need to get back to”. Saudi Arabia, which has supported tougher U.S. sanctions on Iran, said an initial investigation showed the strikes were carried out with Iranian weapons. Riyadh asked international experts to join its investigation, which indicates the attack did not come from Yemen, the foreign ministry said. U.S. officials say they believe it came from the opposite direction, possibly from Iran.


Iranian President Hassan Rouhani said Yemenis had launched the strikes in retaliation for attacks by a Saudi-led coalition that has been battling the Houthis for four years. Riyadh says Tehran arms the group, which has fired missiles and drones on Saudi cities, a charge both deny. King Salman, heading a cabinet meeting on Monday, said Riyadh would handle the consequences of “cowardly attacks” that target vital Saudi installations, world crude supplies and global economic stability. The cabinet urged the world to confront those threats “regardless of their origin”. In a sign investors’ concern may be abating, dollar-denominated bonds issued by the Saudi government and Aramco rebounded on Tuesday. Trump sent Secretary of State Mike Pompeo to Saudi Arabia, but stressed he had not made any commitments to protect the Saudis. “That was an attack on Saudi Arabia, and that wasn’t an attack on us. But we would certainly help them.” Galip Dalay, a non-resident fellow at the Brookings Doha Center, said the sophistication of the attacks and fact such an operation would require high-level approval pointed at Tehran. “Iran is essentially saying, ‘if I can’t get my oil into international markets, then no one should be able to do it’,” he said. “They are basically looking to destabilize an international market that they have been cut out of by U.S. sanctions.”