WTI stabilizes near $58 as Saudi output restoration calms market fears

Oil stabilized on signs Saudi Arabia is quickly restoring production following a debilitating weekend attack, after two tumultuous days in which it surged the most on record and then pared almost half of that gain.

Brent slid on Wednesday, having tumbled the previous day as Saudi Aramco said it had revived 41% of capacity at a key crude-processing complex days after a devastating aerial attack that wrecked vital equipment and rocked world energy markets. The global crude benchmark was back below $64 a barrel after jumping to near $72 in reaction to the disruptions.

The Aramco announcement followed conflicting media reports about the pace and probable duration of the state-owned company’s efforts to repair the damaged Abqaiq facility. Despite the kingdom’s reassurances at a briefing in Jeddah, crude remained around 6% higher than the pre-attack price.

“Saudi Aramco has so far shown great crisis-management skills and great resilience, keeping operations ongoing in the attacks’ aftermath and quickly mobilizing recovery and repair crews,” said Samuel Ciszuk, founding partner of consultants ELS Analysis in Stockholm.

The question of how the U.S. and Saudi Arabia will respond to the attacks, which Secretary of State Mike Pompeo has blamed on Iran, still hangs over the market. The Pentagon is preparing an assessment on who was responsible for the strike and hopes to make it public, a U.S. defense official said. Saudi Arabia will show evidence of Iran’s involvement in the strike, state television reported.

Abqaiq is now processing about 2 million barrels a day and should return to pre-attack levels of about 4.9 million barrels by the end of September, Aramco Chief Executive Officer Amin Nasser said Tuesday.

Adding to the bearish sentiment, the American Petroleum Institute reported a 592,000-barrel increase in stockpiles for the week ended Sept. 13, according to people familiar with the data. That compares with analyst expectations for a 2.25 million-barrel drop. If confirmed by government data due Wednesday, it would break a four-week streak of declines.

Brent for November delivery slipped 76 cents, or 1.2%, to $63.79 a barrel on the ICE Futures Europe exchange at 1:48 p.m. in London. It tumbled by 6.5% Tuesday after surging 15% on Monday.

West Texas Intermediate for October delivery fell $1, or 1.7%, to $58.34 a barrel on the New York Mercantile Exchange. The U.S. benchmark’s discount to Brent for November was $5.54 a barrel.

U.S. President Donald Trump said he saw no reason to allow refiners to dip into the nation’s emergency reserves. “I don’t think we need to; oil has not gone up very much,” Trump told reporters Tuesday aboard Air Force One. “There’s a lot of oil in the world.”

© 2019 Bloomberg L.P.

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