Oil stabilises as Saudi output restoration calms market fears

Singapore

OIL stabilised 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 edged higher on Wednesday after tumbling on Tuesday as Saudi Aramco said it had revived 41 per cent of capacity at a key crude-processing complex days after a devastating aerial attack that wrecked vital equipment and rocked global energy markets. The global crude benchmark was back to about US$65 a barrel after jumping to near US$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 media briefing in Jeddah, crude remained almost 8 per cent higher than the pre-attack price.

The question of how the US 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 US defense official said. Saudi Arabia will show evidence of Iran's involvement in the strike, state television reported.

"The market is certainly setting itself up for a surprise, considering they aren't really pricing in that geopolitical risk premium at the moment," said Daniel Hynes, a senior commodity strategist at Australia & New Zealand Banking Group Ltd in Sydney.

Abqaiq is now processing about two 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 on Tuesday.

Two-thirds of production has been restored and the kingdom sees full recovery in 10 days, Crown Prince Mohammed bin Salman told South Korean President Moon Jae-in, according to a statement from the president's office on Wednesday.

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 on Wednesday, it would break a four-week streak of declines.

Brent for November delivery rose 33 cents, or 0.5 per cent, to US$64.88 a barrel on the ICE Futures Europe exchange at 7:31am in London.

It tumbled by 6.5 per cent Tuesday after surging 14.6 per cent on Monday.

West Texas Intermediate for October delivery was down eight cents, or 0.1 per cent, at US$59.26 a barrel on the New York Mercantile Exchange. The US benchmark's discount to Brent for the same month was US$5.72 a barrel.

Meanwhile, US 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," Mr Trump told reporters on Tuesday aboard Air Force One. "There's a lot of oil in the world."

Saudi Aramco is firing up idle offshore oil fields to replace some lost production, a person familiar with the matter said. Some customers are being asked to accept different grades of crude. The kingdom's domestic inventories are sufficient to cover about 26 days of exports, according to consultant Rystad Energy A/S. BLOOMBERG