LONDON (Reuters) – Saudi Arabia’s ability to avert a global oil supply crunch will only become clear in a few weeks, because for now its crude held in storage can fill the gap and mask the scale of damage to its facilities, traders and analysts say.
Riyadh says production will be back to normal levels in two to three weeks, which means restoring output to about 10 million barrels per day (bpd), after Saturday’s attacks on two sites that usually process and clean up about 5.7 million bpd.
While it carries out repairs, the world’s biggest oil exporter has promised to keep the physical crude market supplied from its inventories held in the kingdom and abroad, estimated to have been about 180 million barrels in July.
But traders and analysts are skeptical repairs to the Abqaiq and Khurais sites will be swift, while the lack of transparency about Saudi inventories adds to uncertainty about whether Riyadh can keep markets supplied without disruption.
“A lot of October arrival barrels were already on the water so the hole is going to show up toward late October,” one senior European oil trader said. “There has been a mad scramble on the paper markets but the physical scramble will come later.”
Precisely when any rush for physical crude kicks in will depend on the level of Saudi Arabia’s inventories and how long it needs to rely on them to ensure clients receive full allocations.
The Joint Organisations Data Initiative (JODI), a body that issues energy data using submissions by its members such as Riyadh, said Saudi inventories at home and abroad fell 8 million barrels in the month of July – the latest month available – to 180 million barrels.
But one veteran oil trader said the accuracy of the JODI figures was the “big unknown”, adding that “overground tracked volume total would appear to be smaller”, a reference to calculations from data analytics firms that use satellites to measure storage.
