About three-million barrels per day of Saudi oil will remain offline for a month, about half the production halted by the weekend’s devastating attacks on key crude facilities, S&P Platts said Tuesday.
READ: Drone hits spark fires at Aramco oil depots
The report came as oil prices dipped slightly following record gains Monday as uncertainty prevailed on global markets over when Saudi Arabia will be able to restore lost production.
Strikes on Abqaiq—the world’s largest processing plant—and the Khurais oilfield that the US has blamed on Iran have knocked out 5.7-million barrels per day, or 6 percent of global production.
“At this point, it looks likely that around 3.0-million bpd of Saudi Arabian crude supply will be offline for at least a month,” S&P Global Platts said in a report.
Saudi Energy Minister Prince Abdulaziz bin Salman was scheduled late Tuesday to hold his first press conference since the attacks, with the expectation that he would give an update on efforts to restore lost production.
Riyadh pumps some 9.9-million bpd of which around 7.0-million bpd are exported, mostly to Asian markets.
“Saudi Arabia will likely say that they can fully supply their customers, although as time goes on this may be challenging. Any indication of delays or supply tightness will lead to further price increases in the weeks or months ahead,” S&P said.
The threat of a prolonged supply outage from Saudi Arabia highlights the lack of spare production capacity in the market, estimated at 2.3-million bpd, most of it held by Riyadh, the energy news provider said.
Reports said Monday the kingdom was likely to restore up to 40 percent of the lost production immediately, but experts had conflicting views on how long it will take to bring production back to pre-strike levels.
The crisis revived fears of a conflict in the tinderbox Gulf region and raised questions about the security of crude fields in the world’s top exporter as well as for other producers.
London-based Capital Economics said global crude stocks, estimated at around 6.1-billion barrels, should be able to compensate for the lost output.
It said that if Saudi Arabia manages to restore full production by next week, oil prices would quickly come down to around $60 a barrel.
But if it takes months and tensions persist, Brent crude prices could hit $85 a barrel, it said.
Brent was trading above $68 per barrel on Tuesday, easing slightly after surging by 20 percent at its peak on Monday—the biggest gain since the 1991 Gulf War.
Yemen’s Iran-aligned Huthi rebels claimed responsibility for the weekend attacks but the United States put the blame on Tehran.
READ: US ‘locked and loaded’ to strike back—Trump
Iran’s supreme leader on Tuesday ruled out negotiations with the US “at any level,” as tensions mounted between the arch-foes after Washington blamed Tehran for attacks on Saudi oil installations.
Ayatollah Ali Khamenei said the US adopted a policy of “maximum pressure” on Iran because it believes it cannot bring the Islamic republic to its knees through other means.
“The policy of ‘maximum pressure’ against the Iranian nation is worthless and all Islamic Republic of Iran officials unanimously believe there will be no negotiations with the US at any level,” he said in a televised address.
Tensions between Iran and the US and its allies have threatened to boil over since May last year when President Donald Trump abandoned a 2015 nuclear deal and began reimposing sanctions in its campaign of “maximum pressure.”
Iran responded by scaling back its commitments under the landmark accord, which gave it the promise of sanctions relief in return for limiting the scope of its nuclear program.
Trump said the US was ready to help Saudi Arabia after the attacks that halted about 6 percent of the world’s oil supply and triggered a record leap in crude prices.
“I’m not looking to get into new conflict, but sometimes you have to,” he said. “That was a very large attack, and it could be met by an attack many, many times larger.
“Certainly, it would look to most like it was Iran,” Trump added.
US Secretary of Defence Mark Esper also singled out Iran as a regional destabilizing force, while stopping short of directly accusing Tehran over the strikes.
The US military, he said, was working with its partners to “address this unprecedented attack and defend the international rules-basedorder that is being undermined by Iran.”
A day after the attacks, the White House had said Trump could meet his Iranian counterpart Hassan Rouhani on the sidelines of the UN General Assembly in New York next week.
Rouhani has already rejected the possibility of direct negotiations with the US unless it lifts all sanctions.
The Iranian president has said even if the sanctions are lifted, any talks must be held in the framework of the nuclear accord.
Khamenei reiterated this on Tuesday, saying that if the US “repents” and returns to the Joint Comprehensive Plan of Action, then it can talk with Iran along with other parties to the deal.
“Without this, no negotiations will happen at any level between the Islamic Republic of Iran’s officials and the Americans, not during the visit to New York or any other visit,” he said.
Yemen’s Iran-aligned Huthi rebels claimed responsibility for Saturday’s attacks on Abqaiq—the world’s largest oil processing facility — and the Khurais oil field in eastern Saudi Arabia.
The Huthis said 10 drones struck the sites, but Saudi Arabia pointed the finger of blame at Iran.
“All indications are that weapons used in both attacks came from Iran” rather than Yemen, said Turki al-Maliki, spokesman for a Saudi-led military coalition.
Rouhani said the attacks were an act of self-defense by the Huthis against the coalition that has been bombing them since 2015 in support of Yemen’s internationally recognized government.
In Riyadh, officials said the attack involved “Iranian weapons,” but fell short of directly accusing their regional arch-rival.
“The Kingdom condemns this egregious crime, which threatens international peace and security, and affirms that the primary target of this attack are global energy supplies, as this attack is in line with the previous attacks against Saudi Aramco pumping stations using Iranian weapons,” the Saudi foreign ministry said in a statement.
Russia and China both called Monday for restraint, amid worries the situation could escalate and put a large portion of the world’s energy supplies at risk.
“We oppose all actions that enlarge or intensify conflict,” China’s foreign ministry said, while the Kremlin urged “all countries to avoid hasty steps or conclusions that could exacerbate the situation.”
Speaking in Baghdad, NATO chief Jens Stoltenberg said he was “extremely concerned about a risk of escalation” and called on “all parties to prevent any such attacks occurring again.”
But he also condemned Iran for stoking violence across the Mideast.
“Iran is supporting different terrorist groups and being responsible for destabilizing the whole region,” he said.
Trump meanwhile played down the threat to global oil markets, saying the US economy could handle the higher prices, and that the US was prepared to release part of its strategic oil reserve if necessary to dampen the impact.
At a political rally in New Mexico late Monday, he boasted that under him, rising oil and natural gas production had made the United States immune to Mideast tensions.
“A few years ago, they would have been in a panic. Today, we got a lot of oil. We got a lot of gas,” he said.
In Congress, though, legislators warned about opening up a new front of conflict, while US troops remain on the ground in Syria, Iraq, and Afghanistan.
“Direct engagement by US military in response to Iran’s attacks on Saudi oil infrastructure would be a grave mistake,” said Republican Senator Mitt Romney.
“The US has continued arms sales so Saudi Arabia can defend itself. If SA responds against Iran attacks, the US should be ready to support in a non-kinetic role,” he said in a tweet.
“The United States must not launch an offensive war against Iran without congressional approval,” said Democratic Representative Ro Khanna.
“The Huthis are NOT Iran. We can’t let another deception lead to war in the Middle East,” he said.
