Global oil market reminded of supply vulnerability

The dramatic 14 September night attack on Saudi Arabia’s key oil infrastructure in the Eastern Province is a sharp reminder of how tight the global supply and demand balance is. Prior to the attack, total global spare capacity was just 3.4 million bpd with most of that in the Middle East. This amount is insufficient to offset the sustained loss of 5.7 million bpd of Saudi crude oil production and 0.7 million bpd of natural gas liquids from the affected Abqaiq processing plant and Khurais field, which supply Arab Light and Extra Light grades. At a time when the world economy is already precariously tipping toward slower economic growth, the risk of sustained higher oil prices could be enough to nudge it further toward recession. For that reason, President Trump and Saudi Arabia’s Crown Prince will push hard to minimize the impact of the supply shut down. This Macro Oils Inform explores the impact on the global oil market.