Saudis try to reassure oil markets

Riyadh: Saudi energy giant Aramco is battling to reassure markets after devastating attacks on two oil plants, which face a prolonged shutdown risk.

It is also a major test for the kingdom's newly appointed energy minister Prince Abdulaziz bin Salman -- a half-brother to the crown prince -- as the attacks could dampen investor confidence in Aramco's upcoming two-stage stock market debut.

The attacks have effectively turned off six percent of the global oil supply, raising the possibility of a spike in prices when markets re-open on Monday -- even as Aramco said it will tap into its reserve stockpiles to offset the disruption.

The Saudi stock market, the Tadawul, fell 3% on Sunday and oil investors braced for crude prices to climb when trading begins later in the day in Asia.

Most of the oil output could be restored within days, but it will take weeks to return to full capacity, according to people familiar with the damage estimates in Saudi Arabia.

 A U.S. government assessment determined that up to 15 structures at Abqaiq, a large Saudi processing facility, suffered damage from the strike. One person familiar with the damage at Abqaiq said the facility was “a wreck.” The person said production capacity was “heavily impacted.”

But "if Saudis can get production back online pretty quickly -- or at least assure the markets they can -- you might not see an enormous price spike," a Forbes online analyst said.

Saudi Arabia is known to have vast underground storage facilities with a capacity of tens of millions of barrels of various refined petroleum products that can be tapped during times of crisis.

Unlike other major suppliers like the US and Russia, which rely on numerous producers spread out over large geographical areas, Saudi Arabia's production is reliant on a single entity -- Aramco.

The use of seemingly low-grade drones to strike the world's most profitable company highlights the easy vulnerability of oil infrastructure in the kingdom, which has splurged billions on sophisticated defence equipment.

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