Saudi Arabia is reaching out to foreign producers for crude and other petroleum products, just days after Yemen’s Houthi Ansaullah movement’s drone attacks which slashed Riyadh’s oil output by more than half.
The world’s largest oil exporter is looking to buy crude oil from its neighbor and additional oil products from the global market, oil traders stated, less than a week after Yemeni forces knocked out roughly half of Saudi Arabia’s crude production.
Two people familiar with the matter told The Wall Street Journal that Riyadh has asked Iraq’s national oil company, the State Organization for Marketing of Oil, or SOMO, for as much as 20 million barrels of crude to supply Saudi’s domestic refineries.
Saudi Energy Minister Prince Abdulaziz bin Salman had claimed that Riyadh will restore its lost oil production by the end of September and has managed to recover supplies to customers to the levels they were at prior to attacks on its facilities. He alleged that the kingdom would achieve 11 million barrels per day (bpd) capacity by the end of September, and 12 million bpd by the end of November.
Shortly after Saturday’s attacks, Aramco was in the market seeking products including diesel, gasoline and fuel oil for domestic use, according to traders, as, to preserve its own crude for exports, Saudi Arabia needs to reduce the amount of domestic crude it refines to make those products.
It isn’t clear what Aramco’s product exports will be in September, traders said, adding that this week Aramco was seeking to import an additional 300,000 barrels a day of oil products.
The drone raid affected mainly light crude grades resulting in the shutdown of the pipeline from which Bahrain’s Bapco receives oil from state oil giant Aramco, Reuters reported citing two trade sources. The pipeline carries 220,000-230,000 barrels per day (bpd) and transfers Arab Light crude. The Bahraini company is looking for other ways to get about 2 million barrels of Saudi crude and may use vessels for transportation.
Aramco has also informed PetroChina that some of its loadings of light crude oil for October will be delayed by up to about 10 days after attacks on the kingdom’s oil facilities, a senior Chinese state oil source with knowledge of the matter stated.
Oil refiners in Japan are gathering information on supplies from Saudi Arabia following the attack on the kingdom’s key crude oil facilities over the weekend, company officials noted.
Aramco has told Indian refiners that it can’t deliver the premium-grade Arab Light crude they ordered. Instead, the company will send heavy, lower-grade crude, The Wall Street Journal had reported.
Yemeni troops have warned Saudi Arabia that their targets “will keep expanding”. The operation shut down about 50 percent of the kingdom’s crude and gas production, and cut the state oil giant’s crude oil supply by around 5.7 million barrels per day. A return to normal production could take months, not weeks, according to reports.
Market and industry experts believe that the incident could stoke already-flaring tensions in the Middle East, driving crude prices higher amid growing fears of supply shortages. The consequences of the strikes led to uncertainty in the oil market as it’s unclear when the giant company can restore operations to normal.