After missiles knocked out half of Saudi Aramco's production capacity, the Kingdom has been scrambling to repair the damage done during a drone-and-missile attack that Washington and Riyadh have blamed on Iran. As it stands, the Kingdom believes it will have repaired the damage at the Abqaiq processing plant within two weeks. But between now and then, expect it to continue upending global supply chains, WSJ reports.
Though these circumstances won't last for much longer, Saudi Arabia has become an importer of refined petroleum products, at least for now.
Much of what Saudi Arabia exports is unrefined crude. It typically keeps some of the crude it produces, refining it into gasoline, diesel and anything else the country needs.
Shortly after Saturday's attacks, Aramco was reportedly in the market looking to buy refined petroleum products including diesel, gasoline and fuel oil for domestic use, which would allow it to bolster its exports of unrefined crude oil. The Kingdom sometimes orders extra diesel during the hot Saudi summer when demand for air conditioning strains the power grid. But the most recent orders were much larger than what is typical for Saudi imports of energy products.
According to Bloomberg, Saudi 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 feed to its domestic refineries. Though Aramco denied reports that it made this request of Iraq, oil prices moved higher Thursday morning following the WSJ report.
The attack on Aramco's Abqaiq oil processing plant will likely suppress activity at domestic refineries for the coming weeks. Initially, it took half of Saudi Arabia's production capacity offline. Now, the Kingdom expects to be back at full capacity within two weeks.
Meanwhile, to continue serving its customers, Saudi Arabia has had to make adjustments to a few orders. Aramco recently told one oil refinery in India that it couldn't deliver the premium-grade Arab light crude the refinery had ordered. Instead, it would need to accept lower-grade crude instead. Adjustments to crude grades have been relatively common over the past week. Aramco even replaced five cargoes of Arab Light with heavy crude from Ras Tanura. Two of those were destined for China.
But given the fierce competition for market share in the modern oil market, it makes sense that Saudi Arabia wouldn't want to risk allowing its customers to shop elsewhere.
Reduced supplies of the Arab Light crude in KSA have prompted Qatar and the UAE to offer international buyers something similar. The US could also fill any gaps in the market for light crude thanks to two new pipelines connecting the shale rich Permian basin to ports that have recently come online, boosting the country's export capacity.
The US doesn't rely on Saudi Arabian oil as heavily as it once did. Oil from the Middle East represents only 3% of refinery orders in the US.