US Strategic Petroleum Reserves are ready to be thrown onto the Oil Market after Major Output Cut in Saudi Arabia.
US is ready to throw World’s largest US Oil Emergency Reserves onto the market after the attacks on one of the World’s largest crude oil facilities of Saudi Arabia cuts significant amount of oil production.
Trump administration said in a statement that US emergency oil reserves are ready to be unleashed after the 50% of oil productions halt in Saudi Arabia following the Attacks on key oil plant. Houthis in Yemen claimed the responsibility for the attacks. US President Trump gave approval to avail Strategic Petroleum Reserves whenever required. Yet the determined quantity has not been confirmed. Saudi Oil ministry also claimed that the supply won’t be effected as they can use their oil reserves to overcome the supply deficit.
Saudi Arabia and its wholesalers aims to use oil inventories to keep the flow of oil supplies in the short run. Although, Kingdom can restart a significant volume of oil output within days but it will take weeks to reach the full production capacity according to experts. However, state owned Aramco can cancel contracts on some international shipments if it’s fail to fulfill the supply commitment because of delay in resumption of full capacity of the oil production at its damaged Abqaiq oil fields as it can take weeks.
Aramco’s Albaiq field outage of oil is impactful not just because of immediate effect on the production but because it can take much of the world’s spare oil capacity offline from the reservoirs. World’s total spare capacity is maximum 3.9 million barrels per day according to Bloomberg.
Head of the commodities strategy at Saxo Bank said in an email, “The global economy can ill afford higher oil prices at a time of economic slowdown.”
International oil prices eased off after the reports that attack on Saudi Arabia’s oil fields won’t effecting the supplies immediately and Saudi Aramco’s oil production to its full capacity may resume quicker than expected.
S&P Global Platts said the after the attack on major Saudi Arabia’s oil fields have increased the concerns over the supply security and risk premium can rise in the global crude market.
Saudi Aramco gave a statement to a media agency that the attacks have no immediate impact on oil supplies as the company delivers crude oil from different sources and has enough inventory. Asian importers of the Saudi oil also affirmed the attack has no immediate impact on oil imports.
The production cut by Saudi Aramco would not only impact the oil markets badly but can also affect its preparations for allegedly world’s largest Initial Public Offering as well.
According to International Benchmark Brent Crude rose about 14.6% to close at $69.02 a barrel. While Oil fell almost 7 percent on Thursday after Saudi Oil Ministry’s Press Briefing.