Singapore — Crude oil prices continued to trade higher in late afternoon trade in Asia Monday, as market participants pointed to supply concerns in the wake of drone attacks Saturday on Saudi Arabia's Abqaiq and Khurais oil facilities, crippling its crude production by half.
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Saudi Arabia confirmed over the weekend the temporary loss of 5.7 million b/d of oil production after disruption at its facilities, but said export customers would continue to be supplied from inventories. Abqaiq is the most important facility in Saudi's oil industry, while Khurais is the second-biggest oil field.
The attack is an escalation in severity after a number of strikes on key oil infrastructure and transit routes in the Middle East this year. Flows had been temporarily halted through Saudi Arabia's main oil transport pipeline to terminals and refineries on the Red Sea, while oil tankers have been attacked in the Strait of Hormuz maritime chokepoint.
"The sudden change in geopolitical risk warrants not only an elimination of the $5-$10/b discount on bearish sentiment, but adds a potential $5-$10/b premium to account for now undeniably high Middle Eastern dangers to supply and the sudden elimination of spare capacity," S&P Global Platts Analytics said.
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**At 4:30 pm in Singapore (0830 GMT) Monday, ICE Brent November futures were trading $5.28/b (8.77%) higher from Friday's close at $65.50/b, while the NYMEX October light sweet crude futures contract echoed similar strength, rising $4.31/b (7.86%) to $59.16/b.
**Platts Analytics said any additional risk premium "could see prices test $80/b despite Saudi Arabia today claiming production and exports will not be significantly impacted."
**Saudi Aramco was able to "put out the fires that resulted from this terrorist act," the company said in Sunday statement. Aramco CEO Amin Nasser said the company is working to restore production, and further updates will come over the next 48 hours, according to the statement.
**According to the Wall Street Journal, national oil company Saudi Aramco was looking to bring back a third of lost crude output by end of the day Monday.
**Saudi Arabia, OPEC's biggest and most influential member, produced 9.77 million b/d in August, according to the latest Platts survey, and exports around 7 million b/d.
**Located in the kingdom's eastern province, plants in Abqaiq process around 7 million b/d of crude.
**The Abqaiq facility is Saudi Aramco's largest oil processing facility and processed about 50% of the company's crude oil production in 2018.
**Khurais, 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.
**Output from the 5 million b/d Ghawar field, Shaybah and Khurais fields is all processed at Abqaiq.
**Saudi Arabia's East-West Pipeline to the Red Sea has a nameplate capacity of about 5 million b/d, with current movements estimated at about 2 million b/d. The East-West pipeline runs from Abqaiq to the Yanbu Port on the Red Sea.
**Saudi Arabia ships about 10% of its total crude exports to Europe through the line to the Red Sea. The line is also critical to Saudi Arabia's own Red Sea refineries, which are mainly supplied with crude oil produced in its eastern region shipped from the Persian Gulf.
**Saudi crude is generally a mix of heavy to medium sour oil, which is generally high in sulfur and yields a decent amount of residual fuel and vacuum gasoil.
**The oil is particularly popular with complex refineries in Asia, US and Europe which can crack heavy sulfurous crudes, and still yield distillate products due to the refiners having complex secondary units.
**The key export grades are Arab Heavy, Arab Medium, Arab Light and Arab Extra Light.
**Saudi Arabia stockpiles totaled 187.9 million barrels in June, according to the Joint Organization Data Initiative. This implies that the kingdom has 26.8 days of cover, assuming zero crude production.
**Saudi Arabia holds crude in storage in domestic tanks as well at sites in Eqypt, Japan and the Netherlands.
**The country's largest oil export terminals are in the port of Ras Tanura which can handle about 6.5 million b/d, according to the EIA. All of Saudi's key crude oil grades load from here along with condensate and products.
**The port comprises three terminals: Ras Tanura terminal, Ju'aymah crude terminal, and Ju'aymah LPG export terminal. The Ras Tanura crude terminal has a 33 million-barrel storage capacity.
**The other key crude export terminal is the King Fahd terminal in Yanbu on the Red Sea, which has a loading capacity of 6.6 million b/d.
**Total crude oil storage capacity at the terminal is 12.5 million barrels. Only Arab Light crude oil grade is loaded at the Yanbu terminal.
**Platts Analytics estimates that global spare capacity is currently 2.3 million b/d, but more than 1.6 million b/d is in Saudi Arabia, showing how vulnerable the market is to supply-side risks.
**The US could move as much as 2.12 million b/d of SPR crude to global markets, but as much as 1.74 million b/d of addition marine distribution capacity would likely be needed in the event of an Abqaiq attack, according to a 2016 DOE report.
**US President Donald Trump late Sunday authorized via Twitter the release of crude from the US Strategic Petroleum Reserve in a "to-be-determined amount."
**Trump's announcement followed a statement Saturday that the US Department of Energy was ready to release crude from the reserve.
**As of Friday, the SPR held 644.8 million barrels of crude in four sites in Texas and Louisiana, including 250.3 million barrels of sweet crude and 394.5 million barrels of sour crude, according to DOE.
**IEA consumer countries are required to hold emergency oil stocks equivalent to 90 days' worth of net imports and the agency sent a note over the weekend saying oil markets remain well supplied.
-- Staff report, firstname.lastname@example.org
-- Edited by Jason Lindquist, email@example.com