MARKET WATCH: Crude prices end week lower before drone attack on Saudi facilities

Light, sweet crude oil for October fell to settle below $55/bbl in New York while Brent in London settled just above $60/bbl on Sept. 13. Prices ended the week down before news of a Sept. 14 attack on oil facilities in Saudi Arabia pushed prices higher.

Light, sweet crude oil for October fell by 24¢ to settle below $55/bbl on Sept. 13 while Brent for November dropped 25¢ to settle above $60/bbl. Prices ended the week down before news of a Sept. 14 attack on oil facilities in Saudi Arabia pushed prices higher Sept. 16.

Operations were suspended at the Abqaiq crude oil and NGL processing facility and Khurais oil field on Sept. 14 following the attack. Crude oil supply disruptions are estimated to be 5.7 million b/d. Country officials expected one third of the capacity to be restored by the end of the day on Sept. 16 while the remainder may take weeks or months to bring back online.

The impact of the attacks “could result in a transient price increase with longer-term impacts felt via a higher oil price risk premium,” Cowen analysts said in an investor note Sept. 16. “For refiners, the coastal complex group could see near-term headwinds while diversified players could be less impacted. [International oil companies] should benefit from higher prices, with [Total SA] having potentially less upside than peers given higher Mideast exposure.”

In August, Saudi Arabia produced 9.8 million b/d and has shown it can produce as much as 11 million b/d, the analysts said, but “it is unclear how much of that crude is processed at Abqaiq.” To help fill the gap, “Kuwait, UAE, and Russia could have capacity to increase production 0.8 million b/d,” the analysts said, noting that additions of Iranian production capacity are unlikely “following [US] Secretary of State Pompeo quickly placing blame on that country for the attack.”

Will Scargill, managing oil and gas analyst at GlobalData, said a prolonged supply outage may test the ability of the US to dynamically adapt to market needs as spare capacity from the Organization of Petroleum Exporting Countries and other producers (OPEC+) “may not be enough to cover all lost output.”

Scargill said, “A period of sustained heightened prices and inventory drawdowns would likely spur US players to drill more. However, their ability to bring swing supply would be put to the test and could be limited by financing and infrastructure constraints.”

Energy prices

Light, sweet crude oil on the NYMEX for October delivery decreased 24¢ to $54.85/bbl on Sept. 12 while the November contract fell 25¢ to $54.80/bbl.

The October gas price increased 4¢ to settle at $2.61/MMbtu on Sept. 13.

Ultralow-sulfur diesel for October decreased nearly 1¢ to a rounded $1.88/gal. The NYMEX reformulated gasoline blendstock for October remained virtually unchanged at a rounded $1.55/gal.

Brent crude for November fell 16¢ to $60.22/bbl. The December contract decreased 21¢ to settle at $59.25/bbl.

Gas oil for October gained 75¢ to $577/tonne on Sept. 13.

The average for OPEC’s basket of crudes for Sept. 13 was $60.02/bbl, down 51¢.

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