Commenting on reports of drone attacks against vital oil infrastructure in the Kingdom of Saudi Arabia, Per Magnus Nysveen, head of analysis at Rystad Energy, said:

“The air attack by Iranian backed militia on vital oil processing terminals in the heart of Saud Arabia’s oil region has turned the market on its head over the weekend. From a situation of unprecedented global oversupply risks, the market will have to replace 5 million daily barrels of oil production by pulling from existing stocks until the oil facilities are brought back to safe operations.”

Nysveen added “This could take a longer time than the authorities initially are claiming. Despite lower exports this year, Saudi Arabia has also depleted its crude oil stocks to the lowest levels in 10 years, so the country alone does not have the same robustness to Middle East interruptions as it used to have. Also, the US cannot quickly replace this volume, as it takes time to relocate oil tankers, and US still has limited export capacity by Very Large Crude Carriers (VLCC).

Bjørnar Tonhaugen, head of oil market analysis at Rystad Energy, commented "This will trigger a significant pull-down of crude oil stocks held by Saudi Aramco, stocks that serve as a crucial security buffer in case of a blockade by Iran in the Strait of Hormuz. The immediate impact on crude prices could be around $10 per barrel and we expect the impact could be around 5 dollars for weeks, as the situation in the Middle East just got more fragile."