Dubai — Attacks on Saudi Arabia's critical oil infrastructure at Abqaiq and Khurais have raised concerns over a spike in prices and prompted the International Energy Agency to reassure markets on Saturday.
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Located in the kingdom's eastern province, plants in Abqaiq process around 7 million b/d of crude. Khurais, located about 250 km southwest of Dhahran, is the second-largest oil field in Saudi Arabia with capacity to pump around 1.5 million b/d of mainly Arab Light crude.
"For now, markets are well supplied with ample commercial stocks," the IEA said in a statement posted on Twitter following Saturday's attacks, which set some of the kingdom's biggest oil facilities ablaze. IEA consumer countries are required to hold emergency oil stocks equivalent to 90 days' worth of net imports.
US President Donald Trump also called Crown Prince Mohammed bin Salman, who oversees overall Saudi oil strategy, to offer his support, according to a statement from the Saudi government.
"The impact of attacking some of the most critical energy real estate on the earth will certainly be felt by the market," warned 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." 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 number of attacks on critical oil infrastructure in the Persian Gulf 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.
Despite the geopolitical volatility, oil prices have struggled to climb much above $60/b amid gloomy demand forecasts for the year and for 2020. The IEA estimates the "call" on OPEC, or demand for the cartel's crude, in the first half of next year will be 1.4 million b/d lower than its overall output level this August.
S&P Global Platts Analytics said the drone attacks "underscore upside price risk with tightening supply demand balances" in the fourth quarter of 2019.
Experts have previously raised concerns about the vulnerability of the Abqaiq facilities to attack. Al-Qaida terrorists carried out an unsuccessful attack on the plants in 2006, which prompted Saudi Aramco to significantly boost security.
Robert McNally, president of Rapidan Energy Group and a former advisor to President George Bush, told Platts in May that any attack that resulted in "severe damage to [the giant oil processing facility of] Abqaiq would send crude prices well into the triple digits." According to a statement in Arabic on Saudi Arabia's state-owned press agency, the country has launched an investigation into the attack. The fires were being controlled and are limited, the agency reported earlier Saturday. Spokespersons for Saudi Aramco and the energy minister were not immediately reachable for comment.
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