London — When Saudi energy minister Prince Abdulaziz bin Salman declared to reporters just three days after a devastating missile attack that state oil company Aramco had risen "like a phoenix from the ashes," the assembled officials at the press conference cheered.
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But a week and a half later, as the country's self-declared Monday deadline rapidly approaches to restore full oil production, traders say the ovation may be premature.
Many buyers say they have been assured by Aramco that their contracted supplies will be met this month, but are in the dark about Saudi Arabia's crude availability for future months.
"I would like to see real evidence that they are going to resume [production] in the coming weeks," one Middle East oil company official, asking not to be identified, told Platts.
Oil field flaring activity detected in satellite imagery indicates Saudi Arabia's production capacity has returned to normal, according to geospatial intelligence firm Ursa Space Systems. But with significant damage to the Abqaiq crude processing facility still to be repaired, how much of the country's output is fit for export remains a question, said Ursa analyst Geoff Craig.
Indeed, Saudi Arabia's crude shipments have dropped sharply in the wake of the attack, according to cFlow, Platts trade flow software, and other tanker tracking services, even with Saudi Arabia cutting its domestic refinery runs and flows to neighboring Bahrain to keep exports up. Market sources have indicated that Saudi Arabia has also sought crude and refined products from other producers to help fill their supply gap.
Crude futures spiked close to 20% in the immediate aftermath of the attack, but have since given up almost all of those gains as Saudi officials have leaked reports to media outlets suggesting that repairs could be ahead of schedule.
Traders will be watching closely how Saudi Aramco sets its official selling prices for November crude loadings next week, with many saying it could be a tricky exercise for the company.
Already tight heavy crude supplies have been squeezed tighter by the September 14 attacks, which forced Aramco to shut down 5.7 million b/d, or half, of its production capacity. That would seem to indicate a higher selling price for Saudi crude.
But officials are keen to maintain the company's reputation as a reliable and secure supplier, as they fast-track plans for an initial public offering of Aramco shares under the country's ambitious economic reform plans. Traders say this could make the company keep any price increase relatively muted, to indicate a quick recovery and no major loss of supply.
"The prices could be set more to a political agenda, than in tune with market fundamentals," one market source said.
Saudi officials did not respond to messages seeking comment.
Crude volume allocations to Aramco's term lifters will be confirmed around October 10 or 11, providing even more telling clues about the company's recovery from the strikes.
Another market source briefed on the Saudi repairs told Platts that the aggressive time line "is not practical, but politics right now [are] very tough."
At his press conference, Prince Abdulaziz, flanked by Aramco Chairman Yasir al-Rumayyan and CEO Amin Nasser, said production capacity in the world's largest crude exporter would be restored to 11 million b/d by the end of the month, with full capacity of 12 million b/d coming by the end of November.
Officials then hosted a media tour last Friday of the damaged Abqaiq plant and Khurais oil field that Aramco said showed off the company's "rapid response and resilience," but it also raised questions about how such extensive damage could be rehabilitated as quickly as promised.
The attacks, which Saudi Arabia blamed on its geopolitical rival Iran, left scorched towers and punctured storage tanks that experts said would require custom-built equipment and likely months to fully repair. Iran has denied involvement.
Abqaiq is the world's largest crude processing facility, with nameplate capacity of 7 million b/d. It contains 18 stabilization towers and multiple spheroids used to depressurize, desulfurize and de-gas crude to make it safe for transport.
"I seriously doubt Saudi Aramco's capability to recommission such facilities [by September 30] considering the depth of the damage and all the associated testing protocol needed prior to restart," said Middle East-based petroleum engineer and independent oil analyst Einstein Millan Arcia.
Saudi officials have said that any shortfalls in production would be filled by drawing on the nation's vast oil storage inventories.
Ursa's monitoring of Saudi storage sites at Ras Tanura, Yanbu and Khafji show that inventory levels are down by 11.4 million barrels compared with the week ended September 12, just two days before the attack, although they have risen slightly in recent days. Total Saudi Arabian stocks were 61.7 million barrels as of Wednesday, Ursa said.
According to cFlow, Saudi Arabia's crude exports have averaged 5.94 million b/d since the strikes, compared with 7.19 million b/d September 1-13 and 6.97 million b/d in August.
Data analytics firm Kpler estimated Saudi Arabian exports over the last 10 days averaged 6.15 million b/d, compared with 7.74 million b/d in the 10 days leading up to the attack, while crude inventories at Ras Tanura, Juaymah, Dhahran, and Khafji fell 4.33 million barrels September 16-24.
Saudi Aramco has already informed some customers that it may substitute its more desirable Arab Light and Arab Extra Light grades with barrels of Arab Medium and Arab Heavy because of the Abqaiq outage.
Any further dislocations will become apparent in the coming weeks.
-- Herman Wang and Eklavya Gupte, with Eesha Muneeb in Singapore and Tahani Karrar in Dubai, firstname.lastname@example.org
-- Edited by Valarie Jackson, email@example.com