Oil prices continued to decline after Saudi Arabia, the world’s largest exporter of crude assured markets production will be back online by the end of the month.
Brent was trading down 1 per cent at $63.75 per barrel at 6.35pm UAE time, after closing in the negative on Tuesday after Saudi Energy Minister Prince Abdulaziz bin Salman said the kingdom would have 11 million barrels per day of capacity on stream by the end of September.
West Texas Intermediate, which largely tracks North American crude was trading down 2 per cent at $58.31.
Brent had marked the biggest intra-day jump in over two decades on Monday, reaching as high as $71 per barrel after markets opened following the attacks.
Saudi Arabia, which accounts for 12 per cent of global supply suffered its biggest outage after attacks on Saudi Aramco installations early on Saturday disrupted 5.7 million bpd of the country’s output. The lost volume, which is equivalent to 5 per cent of global production, is the worst ever outage, superseding supply shocks during the 1979 Iranian revolution and the 1991 invasion of Kuwait by Saddam Hussein, according to the International Energy Agency. The kingdom has since managed to restore 41 per cent of the lost output, the Saudi minister said on Tuesday in Jeddah.
The kingdom's key oil stabilisation centre, a 7 million bpd capacity plant at Abqaiq, suffered heavy damages during the attacks. The Abqaiq plant, the largest of its kind in the world, “sweetens” crude sourced from some of the biggest oilfields in Saudi Arabia’s Eastern Province. The plant currently operates at 2 million bpd capacity from pre-attack levels of 4.9 million bpd, Aramco chief executive Amin Nasser said on Tuesday.
The strikes on Saudi Arabia’s large Khurais field took offline around 2 billion cubic feet per day of associated gas, 1.3 billion cubic feet of dry gas, 500 million cubic feet of ethane and about half a million barrels of gas liquids.
Swiss bank UBS said additional supply disruptions to Saudi crude could not be ruled out with the kingdom’s available spare capacity at only 1 million bpd or the equivalent of 1 per cent of global supply. "We expect market participants to keep a risk premium on oil prices over the coming months,” said commodity analyst Giovanni Staunovo.
The lender revised upwards its forecast by $6 per barrel with Brent expected to trade at a range of $59 to $71 per barrel and WTI between $54 and $67 per barrel.
However, Norbert Rucker, Julius Baer's head of economics, said "ample storage and spare capacities seem sufficient to fully weather the disruption ... we challenge the view of a lasting risk premium in oil prices and feel reassured with our neutral view and longer-term price forecasts below $60 per barrel".
Prince Abdulaziz, who declared the attacks “an act of war”, said Aramco will continue to honour its export requirements and would reduce domestic refinery runs by 1 million bpd to 1.9 million bpd.
There would be no fallout on the state oil company’s plans for public listing, chairman Yasir Al Rumayyan said on Tuesday, adding that an initial public offering could happen within 12 months, which was reiterated by Finance Minister Mohammed Al Jadaan on Wednesday.
Mr Jadaan told Bloomberg TV the attacks had "zero" impact on the kingdom's revenue or its economy, that Saudi Arabia's non-oil economy was on track to expand 2.9 per cent this year. The country will continue to spend as needed on defence and Aramco's listing on a secondary market is still being considered, he said.
The kingdom's benchmark Tadawul stock index rose 0.8 per cent in early trading on Wednesday and closed 0.65 per cent higher.