Oil markets are a step away from the crisis

The disruptions in the oil market may not be over, despite the volatility and prices that have eased in the days following the Abqaiq attack.

The repairs at the Abqaiq processing plant are on an extremely tight schedule. According to Bloomberg, Saudi Aramco had about 50 million barrels of land in the country before the attack, plus about 80 million barrels in ports around the world (though not all of this is usable).

Aramco is determined to continue export levels from falling, choosing to pull down inventories to keep shipments unaffected. It is also possible to reduce the refining volume by approximately 1 million barrels per day (mb / d), which will cut product exports but release crude oil. Another strategy is to start production in some offshore fields.

But Aramco vowed to make repairs and bring Abqaiq processing back to pre-attack levels by the end of September, which is less than two weeks away at this time. If repairs take longer, there will be increased scrutiny of Saudi inventory, and any disruptions to buyers will have global consequences. "They probably have about a month of inventory," Amrita Sen of Energy Aspects told Bloomberg.

It may take a few weeks before more is known. "Many barrels of water in October were already on the water, so the hole will emerge towards the end of October," a European oil trader told Reuters. "There has been a crazy shuffle in the paper markets, but the physical encryption will come later."

There is also a growing skepticism that Saudi Arabia will come to terms with the real extent of the damage and its ability to turn things around. "The actual long-term impact of the attacks on the Saudi oil infrastructure is still difficult to judge because the country is likely to play down any issues given the importance of its customer relationship and the upcoming IPO to Saudi Aramco," Commerzbank wrote in a note on Friday. Related: Prosperous Saudis being bullied for buying Aramco

If Aramco loses its opinion as a reliable supplier, it would have serious implications for the assessment when the company is published. Meanwhile, the FT reports that the Saudi government is bullying wealthy facilities to buy into the IPO to ensure success. Riyadh is clearly concerned about the perception of Aramco in the wake of the Abqaiq attack.

There was also news that Saudi Arabia might need to import oil to meet its obligations to customers, raising questions about Aramco's ability to maintain export levels. Of course, there will be some quality problems with the type of oil being stored and what was lost due to the Abqaiq power outage, and it is not uncommon for exporters to import as well. But if one of the world's largest oil producers and exporters suddenly crawls with importing oil, it raises some red flags.

If they really ask Iraq for oil, it will "imply that the damage to Saudi infrastructure is actually greater and more lasting than the country is willing to admit," Commerzbank said. For its part, Aramco denied having asked Iraq's state-owned oil marketing company on oil.

Meanwhile, a number of other supply disruptions could also disrupt the oil market and intensify the Abqaiq power outage A little more than a week ago, Nigeria's Bonny Light suffered another surge in power at Nembe Creek Trunk Line, which has repeatedly been targeted Related: Libya Is Facing a New Oil Crisis?

Reuters also reports that Venezuela may see more disruptions in supply when buyers rule the country away. necessary to further reduce upstream output. "Storage is almost at peak capacity. We are only a few days before we are forced to shut down production at some eastern oil fields, a PDVSA leadership told Reuters. The Petropier Oil blending plant, where Chevron is a co-operator, has suspended operations. That reduced production to half of an oil supplying the plant, according to Reuters.

In Libya, the struggles over control of the National Oil Corporation are escalating. A subsidiary in the eastern part of the country is breaking away and can seek to export oil on its own. A tug of war over the legal authority to export oil has led to sudden disruptions in the past.

Of course, there is the possibility of a military strike by the United States or Saudi Arabia against Iran. It is likely to be quite catastrophic for all involved, as it will dramatically increase the chance of an entire war. Iranian officials have said just as much. In a regional war, it is difficult to imagine a scenario where a much larger volume of oil production capacity is not switched off.

By Nick Cunningham of Oilprice.com

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