Several petrochemical company have announced feedstock supply disruptions following the drone attacks on major Saudi oil facilities.
Companies including Sipchem, Tasnee, Yansab, and Sabic all announced feedstock supply disruption of 30 to 50 per cent.
The attacks on Saudi Aramco’s Abqaiq processing facility and the Khurais field on Saturday morning have led to production cuts of around 5.7 million barrels per day, or around half the company’s production capacity, according to the kingdom’s Minister for Energy.
The price of oil saw the biggest one-day rise since the start of the Gulf War, as it rose by 20 per cent, before later falling.
Wood Mackenzie’s Vice President for Refining, Chemicals, and Oil Market, Alan Gelder, said: “This attack has material implications for the oil market, as a loss of five million barrels per day of supplies from Saudi Arabia cannot be met for long by existing inventories and the limited space capacity of the other OPEC+ group members.”
“A geopolitical risk premium will return to the oil price.”
Vima Jayabalan, Wood Mackenzie Research Director, said: “Abqaiq and Khurais are main processing centres for Saudi Arabia’s Arab Extra Light and Arab Light crude oil.”
“China, South Korea, Japan, and India are the biggest takers in Asia, with China and Japan leading the pack at an average of around 1,000 kilo barrels per day each.”
“India could be most exposed as its reserves are the least. China has Strategic Petroleum Reserve and commercial crude storage, while Korea and Japan have IEA reserves to fall back on.”
“Collectively, Asian demand for Saudi Arabian crude is around five million barrels per day, accounting for almost 72 per cent of Saudi Arabia’s crude exports.”
“Asian consumption of Arab Extra Light and Arab Light grades alone from the affected facilities varies between 2.5 and 2.7 million barrels per day seasonally. The region’s dependence has increased significantly over the last one and a half years.”
“The impact and the next course of action will depend on the duration of the outage. Saudi Arabia has enough reserves to cover the shortfall over the next week, but if the outage extends, then filling the gap with the right type of crude quality could be a challenge.”
“Moreover, OPEC+ output cut predominantly consists of medium and heavy sour crudes.”
“In terms of refining and petrochemicals, the spike in crude oil prices will dent margins further. A prolonging outage and further upside above-ground risks in the near term could have an impact on the preparation ahead of the IMO marine bunker specifications change, but at the moment it is still early days to assess.”
Saudi Aramco President and CEO Amin H. Nasser, said: “We are gratified that there were no injuries. I would like to thank all teams that responded timely to the incidents and brought the situation under control.”
“Work is underway to restore production and a progress update will be provided in around 48 hours.”