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SAUDI OIL ATTACKS

It could take months to restore Abqaiq's output

Dubai

SAUDI Aramco could take months to restore output at its giant Abqaiq plant. The question now is how quickly the kingdom can recover from the devastating strike, which knocked out roughly 5 per cent of global supply. Saudi Arabian officials told a senior foreign diplomat they face a "severe" disruption measured in weeks and months.

Saudi Arabia's Foreign Ministry said on Monday that the attack cut oil production by 50 per cent. While Aramco is still assessing the state of the plant and the scope of repairs, it currently believes less than half of the plant's capacity can be restored quickly, said people familiar with the matter, who asked not to be identified because the information isn't public.

"Damage to the Abqaiq facility is more severe than previously thought," said Amrita Sen, chief oil analyst at Energy Aspects Ltd. "While we still believe up to 50 per cent of the 5.7 million barrels a day of output that has been disrupted could return fairly swiftly, full resumption could be weeks or even months away."

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Saudi Aramco is firing up idle offshore oil fields - part of its cushion of spare capacity - to replace some of the lost production, one person said. Aramco customers are also being supplied using stockpiles, though some buyers are being asked to accept different grades of crude oil. The kingdom has enough domestic inventories to cover about 26 days of exports, according to consultant Rystad Energy A/S.

Abqaiq's stabilisation towers, which separate gaseous compounds from crude oil, could take the longest to repair, said Phillip Cornell, a former senior corporate planning adviser to Aramco. "They can take weeks or months to get specialised parts," he said at an event hosted by the Atlantic Council in Washington.

"No matter whether it takes Saudi Arabia five days or a lot longer to get oil back into production, there is but one rational takeaway from this weekend's drone attacks on the Kingdom's infrastructure - that infrastructure is highly vulnerable to attack, and the market has been persistently mispricing oil," Citigroup Inc.'s Ed Morse wrote in a research note.

Mr Trump authorised the release of oil from the US Strategic Petroleum Reserve, while the International Energy Agency, which helps coordinate industrialised countries' emergency fuel stockpiles, said it was monitoring the situation.

The Organization of Petroleum Exporting Countries is in regular contact with the Saudi authorities, who have risen to the challenge by keeping oil flowing, the group's Secretary-General Mohammad Barkindo said in a Bloomberg TV interview. It's premature to talk about reversing the oil-production cuts implemented by OPEC and its allies, he said.

Even if OPEC+ did decide to roll back their cuts, they would only be able to add about 900,000 barrels a day to the market, just a fraction of the Saudi losses, according to Bloomberg calculations based on IEA data. BLOOMBERG