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adam2
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Post by adam2 »

If prices reach twice the present levels, would SA rush to repair the damaged facilities ?
Production has been about halved. but if the price is doubled, then the same revenue would result from half the sales.

If however production remains halved for an extended time, and prices DONT double, then SA faces a shortfall in revenue, with potential effects on the stability of the kingdom.
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Post by Little John »

My guess is prices would significantly increase in the short term and then taper back in the medium term as other oil producers make up the slack one way or another and/or demand adjusts to the lower supply.

So, the above gives then a short term window to get things fixed without too much disruption to revenue. How big that disruption to revenue will be, even over the short term, depends on how much prices rise in the short term
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Post by clv101 »

Little John wrote:My guess is prices would significantly increase in the short term and then taper back in the medium term as other oil producers make up the slack one way or another and/or demand adjusts to the lower supply.
There isn't scope for other producers to make up much of the slack. The amount off-line is similar to the last decade's addition from US shale oil.
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Post by Little John »

clv101 wrote:
Little John wrote:My guess is prices would significantly increase in the short term and then taper back in the medium term as other oil producers make up the slack one way or another and/or demand adjusts to the lower supply.
There isn't scope for other producers to make up much of the slack. The amount off-line is similar to the last decade's addition from US shale oil.
Okay then. Prices will spike upwards and then adjust downwards on reduced demand as the world falls into another recession on the back of that price spike unless they get the plant fixed in time.
Last edited by Little John on Sun Sep 15, 2019 8:57 pm, edited 1 time in total.
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Post by cubes »

Doesn't saudi have a lot of oil stored up (at least, that's what I've been reading), surely that would keep the price spike surpressed a little?
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Post by clv101 »

cubes wrote:Doesn't saudi have a lot of oil stored up (at least, that's what I've been reading), surely that would keep the price spike surpressed a little?
Rationally, there are large oil stockpiles all over the place, some 700 million barrels in the US strategic oil reserve, so a 5 mbpd shortfall could be covered for the several months repairs take...

However, reserves often aren't released smoothly at the first sign of disruption, how do we know this isn't the first of a series of attacks on ME oil infrastructure? The market will price in both the physical reality and higher risk. I think we'll be +$5-10 tomorrow.
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Post by adam2 »

Brent rises to about $67 in early trade, an increase of about 10%.
Oil trades are limited at this time of night, and the price achieved during normal working hours, say from about 08-00 BST may more accurately reflect market sentiment.

A rise of over 10% in one day is certainly unusual, but the actual price achieved has been reached at least twice this year, and is less than half the all time high of about $140.
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Post by vtsnowedin »

The usual speculators will work themselves into a tizzy and bid the price up beyond what the supply shortfall would warrant. I would not be surprised to see Brent at $100 within a few trading days.
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Post by PS_RalphW »

From what I have seen of aerial photos, the strikes were pinpoint accurate on several identical pieces of the processing plant hardware, presumably selected to be the most difficult to replace quickly. As long as the resultant fires did not do extensive damage, I expect the plant to resume some operations quickly, then bring on the remaining capacity over a period of months. There were also strikes on oil fields as well, presumably selected again for maximum damage to pumping and water separation facilities. I do not know how much production that will have taken off line.

I think the world has gone from relative glut of light oil and shale, to a relative shortage of heavier oils. SA and UAE were the only countries likely to have significant spare production capacity, so unless Iran gets a to sell more oil against sanctions, we may see Brent rise in the coming months. At least SA storage tanks should be full, so they should be able to cover the production loss for a few weeks at least.

It has to be said that Iran is the most likely to benefit financially from this, and given the one sided imposition of sanctions by Trump, I can't really blame them.

https://www.businessinsider.com/satelli ... ?r=US&IR=T
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Post by ReserveGrowthRulz »

Current inventory/storage in crude looks pretty reasonable right now. So a cumulative billion barrels of loss over time probably won't cause any long term market upset. Even better from both the US and Saudi perspective, prices might stay higher in the interim and if Saudi plays it's cards right, they can come back online slower rather than faster, possibly keeping prices in a range they would be happier with.

OPEC has been cutting production for awhile now, trying to account for the new supply coming from Saudi America and a global slackening demand.
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Post by PS_RalphW »

I'm no expert, but I can't see drones being the primary weapon used in these attacks. The damage looks like it came from precision guided missiles, and if the photos are correctly reported, from a north or N/W direction. Clearly, the weapons used outsmarted any defensive weapons systems at the sites, and they would be close to state of the art for such a high profile target.

The damage pattern is what I would expect from cruise missiles.

Oil price trending up again, over 12% on the day
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Post by adam2 »

PS_RalphW wrote:I'm no expert, but I can't see drones being the primary weapon used in these attacks. The damage looks like it came from precision guided missiles, and if the photos are correctly reported, from a north or N/W direction. Clearly, the weapons used outsmarted any defensive weapons systems at the sites, and they would be close to state of the art for such a high profile target.

The damage pattern is what I would expect from cruise missiles.

Oil price trending up again, over 12% on the day
I agree "drone" seems to be the new term for almost any type of rocket or missile. Cruise missiles do indeed look to have been the likely weapon.
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Post by clv101 »

It's remarkable how little attention this attack is getting in the global media. Something of this magnitude has never happened before, we certainly haven't seen the last of the short term impact and in the long term it's realised a long held concern over their infrastructure vulnerability.
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Post by ReserveGrowthRulz »

clv101 wrote:It's remarkable how little attention this attack is getting in the global media.
Maybe European "global media". Here in North America it is being well covered across all sorts of MSM platforms.
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Post by raspberry-blower »

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