It was arguably the most significant event in the oil market since Iraq’s invasion of Kuwait before the 1991 Gulf War.
The September 14th attack against Saudi Arabia’s oil infrastructure damaged the world’s largest oil processing facility and the country’s second-largest oil field.
The disruption to supply — equal to 5% of global output — sent oil futures soaring 14% higher on Monday when electronic trading resumed after the attack two days earlier.
Source: IntercontinentalExchange
How quickly could Saudi Aramco repair the Abqaiq processing facility? Will exports be slashed? How much crude does Aramco have in inventory? How long will those reserves last?
When Prince Abdulaziz bin Salman addressed the media Wednesday, Saudi Arabia’s newly-appointed oil minister delivered a message of calm.
Saudi oil production will be “fully restored” by the end of September, less than two weeks away. Aramco would also honor export commitments, with inventories draw down to offset production shortfalls, the oil minister said.
Prince Abdulaziz’s sanguine message turned oil prices lower. But make no mistake, the oil market is still trying to figure out the reality.
A sense of confusion is visible in oil prices. On one hand, oil prices aren’t especially high in absolute terms.
Source: ICE
However, the spread between Brent’s short-dated and long-dated contracts is unusually steep, a condition that suggests a very tight oil market ahead.
Source: ICE
Getting information on the extent of damage and pace of repairs outside official lines of communication was nearly impossible, until recently.
Satellite imagery can now step into this information gap and provide ground truth.
A September 18 image of Abqaiq taken by Planet Lab, one of our satellite-owner partners, shows repair vehicles and equipment present throughout the complex.
Abqaiq facility, Saudi Arabia (Sept 18, 2019)
Imagery Source: Planet Labs
Annotations/illustrations: Ursa Space
Abqaiq is critical because the facility removes impurities, such as hydrogen-sulfide gas, from the raw crude oil that arrives from surrounding oil fields.
Reduced processing capability at Abqaiq limits the volume of crude from Saudi Arabia’s massive oil fields converted to exportable-quality crude.
Aramco CEO Amin Nasser said Tuesday that Abqaiq was processing 2 million barrels per day of crude, versus 4.9 million bpd before the attack.
Field status
A related question since the attack has been the operational status of oil fields that depend upon Abqaiq for processing. Did they shut off?
We analyzed satellite imagery of Ghawar, Shaybah and Khurais. This imagery contains information on combustible sources found within the oil fields.
That information can be used to determine whether flaring is present or not. We detected flares consistent with historical activity at Ghawar, Shaybah and Khurais.
There was a notable caveat, however. A combustible source at Khurais far exceeded the normal temperature of a flare stack.
The location was consistent with other satellite imagery and news reports that Khurais was targeted in the September 14 attack.
Tapping reserves
As mentioned above, Aramco plans on meeting its export requirements by tapping inventories held by Saudi Arabia.
It will therefore be important to monitor inventories held by Aramco and other Gulf producers who may step-up exports.
S&P Global Platts reported Thursday, citing unnamed sources, that Aramco requested to buy crude from Iraq’s state-owned oil company to supply Saudi refineries. Iraq’s oil minister denied the report.
We measure crude inventories globally using satellite imagery from synthetic aperture radar (SAR).
Our coverage includes the locations that are necessary to track the impact on storage as a result of production disruptions.
This includes Saudi Arabia, as well as Kuwait, Iraq and UAE which may need to supply more barrels to the market. That extra demand will likely be sourced from inventories.
In addition, Aramco holds inventories outside Saudi Arabia in storage farms it either owns or leases. Those places are Rotterdam, Sidi Kirir, Okinawa and Fujairah.
Our coverage shows Saudi Arabia inventories were slightly above year-ago levels.
Source: Ursa Space
It’s not surprising that inventories at Saudi Arabia’s main export terminal have fallen sharply since the attacks.
On September 18, Ras Tanura equaled 32,620,183 barrels, down 7.5 million barrels from three days earlier. By comparison, Ras Tanura ranged from 35 million barrels to 45 million barrels over the last 12 months.
We will continue to track this developing story and provide more insights gleaned from our data.
If you’re interested in a free evaluation of our data, contact us at sales@ursaspace.com or sign up here.
