Saudi Arabia confirmed late Saturday the temporary loss of 5.7 million b/d of oil production after attacks on its facilities, but said export customers would continue to be supplied from inventories.
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"Work is underway to restore production and a progress update will be provided in around 48 hours," Amin Nasser, CEO of Saudi Aramco, said in an emailed statement Saturday.
A separate statement from the newly appointed energy minister, Prince Abdulaziz bin Salman, said the kingdom's export customers would be supplied from stocks.
Earlier drone attacks set on fire oil facilities at Abqaiq and Khurais. Located in the kingdom's eastern province, plants in Abqaiq process around 7 million b/d of crude, roughly equal to the country's entire exports. Khurais, about 250 km southwest of Dahran, is the second-largest oil field in Saudi Arabia with capacity to pump around 1.5 million b/d of mainly Arab Light crude.
"If outages are as big as suspected, this will have huge implications for oil prices," said Shin Kim, head of supply and production analytics at S&P Global Platts Analytics. "Much will depend on what's out, the extent of the damage, and the ability of storage to cushion. That said, geopolitical tensions, which have so far been outweighed by bearish sentiment on macro concerns and a potential US-Iran deal, are now front and center for oil markets and this will be bullish for prices."
Saudi Arabia pumped almost 9.8 million b/d in August, significantly below its 10.3 million b/d quota agreed with OPEC and Russia, according to the latest S&P Global Platts survey of production.
The strikes on Abqaiq and Khurais are the latest in a number of attacks on critical oil infrastructure in the region, including pipelines and tankers near the Strait of Hormuz. Houthi rebels in Yemen claimed responsibility for Saturday's attack, according to a statement on Yemeni news channel Al Masirah, citing a televised statement from a brigadier of the armed forces.
However, US Secretary of State Mike Pompeo pointed the finger at Iran for the attack. He said on Twitter the US and its allies would work to ensure energy markets remained well supplied and added: "Iran has now launched an unprecedented attack on the world's energy supply. There is no evidence the attacks came from Yemen."
Department of Energy Press Secretary Shaylyn Hynes said in a statement that Pompeo had been briefed on the attack and was ready to deploy resources from the Strategic Petroleum Oil Reserves if needed to offset disruptions to oil markets.
"The secretary has also directed DOE leadership to work with the International Energy Agency on potential available options for collective global action if needed," she said.
Market experts are concerned about the impact the attacks will have on oil prices despite assurances Saturday from the International Energy Agency that markets were well supplied.
"The impact of attacking one of the most critical [areas of] energy real estate on the earth will certainly be felt by the market," said Mohammad Darwazah, director of geopolitics and energy at Medley Global Advisors. "The magnitude of the price hike, and the duration, will depend on the damage and how much production will be impacted."
-- Andy Critchlow, firstname.lastname@example.org
-- Edited by Jason Lindquist, email@example.com