Notice 15/09/2019

Santiago Economía I
Luque Attack on Saudi Oil Facility Is Seen as Short- Laura Marcela
Barrera Term Disruption Giraldo
20171015133 Lunes
https://www.nytimes.com/2019/09/15/business/saudi-arabia- 16/09/2019
oil-energy-prices.html

HOUSTON — The drone attack on one of Saudi Arabia’s most important oil facilities could
cripple a portion of Saudi petroleum exports for days or even weeks and send energy prices
higher. But experts say that a severe shock to energy markets and the world economy is unlikely.

The attack on the Abqaiq processing facility, deep in Saudi territory, displayed the vulnerability
of the kingdom to tensions in the Persian Gulf region. The country produces about 10 percent of
the world’s oil supplies. The disruption could slash Saudi Arabia’s daily oil exports of 7.4 million
barrels by as much as three-quarters, taking roughly 5 percent of global supplies off the market,
unless the facility is quickly repaired.

The attack also raised the possibility of further disruptions in Saudi Arabia’s oil production if
there were additional attacks on its fields and pipelines.

The planned initial public offering of the kingdom’s national oil company, Saudi Aramco, could
also be hurt if international investors doubt Saudi Arabia’s ability to defend its vital energy
infrastructure.

But as luck would have it, the attack came as global oil stockpiles were higher than usual, several
producing countries have ample spare capacity and American oil facilities have so far been
spared from a damaging hurricane season. Meanwhile, a slowing global economy has moderated
energy demand.

“We do not expect an immediate disruption on global oil trade, since many nations, including
the U.S., have ample crude oil in storage,” said Manish Raj, chief financial officer of Velandera
Energy Partners, a Louisiana oil exploration and production company. “The Saudis themselves
have enough storage to meet their export obligation for the next 60 days. Therefore, we expect
no supply-demand imbalance in the near term.”
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The main uncertainty is how long will it take for the Saudis to repair the Abqaiq facility, which
separates gas from oil from several important oil fields. While the fire was put out quickly, the
Saudis may not know the answer for days since the facility is large and has complex equipment
that still needs to be tested.

Should the damage be fixed quickly, Eurasia Group, a risk consulting firm, estimates that oil
prices could rise a modest $2 to $3 a barrel, which would still leave the global benchmark Brent
crude below $65 a barrel, relatively low by recent historical standards. The firm estimated that
a more long-lasting disruption could mean an increase of $10 a barrel, though that would still
leave prices several dollars below where they were a year ago.
 Notice 15/09/2019
Santiago Economía I
Luque Attack on Saudi Oil Facility Is Seen as Short- Laura Marcela
Barrera Term Disruption Giraldo
20171015133 Lunes
https://www.nytimes.com/2019/09/15/business/saudi-arabia- 16/09/2019
oil-energy-prices.html

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Other analysts took a dimmer view, even as Saudi Aramco said on Sunday that repairs were
already underway.

“The problem is that the attack is so significant, “ said Bill Farren-Price a director at RS Energy
Group, a market research firm. “It demonstrates that one of the best regional oil companies has
difficulties defending itself from this new style of threat. That theme is going to endure. “

There are doubts the Saudis will be able to maintain their usual exports and satisfy domestic
consumption.

“Export volumes will be severely impacted,” Clay Seigle, an analyst at Genscape, a market
research firm, said in an email. “The market will be left with a thinner cushion against additional
supply disruptions, and traders will bid prices higher as a result.”

How the other countries in the Saudi-led OPEC will respond is not yet clear. In a phone
conversation, an official with the Organization of the Petroleum Exporting Countries said that
the Saudis had so far not shared information about the extent of the damage and when output
might be restored. He also said that OPEC had not yet begun discussions on potentially loosening
supplies. “We have to see how the market reacts tomorrow,” the official said.

The average price for a gallon of regular gasoline in the United States was $2.57 on Sunday, 28
cents lower than a year ago. That decline has been a boon to consumers, giving them extra
spending power that has helped retailers and restaurants. An increase in prices to last year’s
levels is possible over the next few weeks unless the Saudi facility is quickly fixed, energy analysts
said.

Only a decade ago, the attack would probably have sent oil prices soaring. But that was before
American oil production climbed with the shale drilling frenzy. The United States now produces
roughly 12.1 million barrels a day, double what it produced in 2012 and 1.4 million barrels more
than only a year ago.

The United States imports about 630,000 barrels of Saudi oil a day, down about half from 2017.

American oil companies have recently been cutting back on production, but higher oil prices
would encourage them to produce more. At the same time, several pipelines to the Gulf Coast
are nearing completion and that could stimulate significant export growth over the next six to 10
months.