Oil steadies; Saudi pledges to restore output lost

An Offshore Rig

Oil prices changed a little on Wednesday, steadying after Saudi Arabia said it will restore by the end of the month production lost in weekend attacks on its facilities.

Prices plummeted 6 percent on Tuesday after Saudi Arabia’s energy minister said the country had managed to restore oil supplies to customers to where they stood before the attacks on its facilities that shut 5 percent of global oil output by drawing from its huge inventories.

But tension in the region remained elevated after the United States said it believed the attacks on the world’s top oil exporter originated in southwestern Iran. Iran has denied involvement in the strikes.

Brent crude oil futures LCOc1 were flat at 64.55 dollars a barrel by 0732 GMT. U.S. West Texas Intermediate (WTI) crude CLc1 futures were down 15 cents, or 0.1 percent, to 59.19 dollars a barrel, after sinking 5.7 percent on Tuesday.

“Considering limited spare (production) capacity outside Saudi Arabia and risks of renewed attacks on Saudi energy infrastructure, a risk premium is likely to stay on oil prices in the foreseeable future,”  UBS analysts said in a note.

Energy Minister Prince Abdulaziz bin Salman said on Tuesday that average oil production in September and October would be 9.89 million barrels per day and that the world’s top oil exporter would ensure full oil supply commitments to its customers this month.

Saudi Aramco has informed some Asian refiners that it will supply full allocated volumes of crude oil in October, albeit with some changes.

Relations between the United States and Iran have deteriorated since U.S. President Donald Trump pulled out of the Iran nuclear accord last year and re-imposed sanctions on its oil exports.

“The oil market is facing challenging times. Recent attacks on oil facilities in Saudi Arabia have painfully demonstrated the risks to oil supply, which is why short-term price spikes are possible at any time,”  Commerzbank analyst Carsten Fritsch said.

Still, fundamental supply and demand balances in the oil market are deteriorating, Fritsch added, forecasting Brent oil prices of 60 dollars a barrel next year.

“Demand growth is weakening, oil supply outside OPEC is rising significantly and OPEC+’s production discipline has recently faded,”  he said.

The Organization of Petroleum Exporting Countries and a number of other producing nations, including Russia agreed last year to cut output by 1.2 million bpd to reduce global stocks and prop up prices.

U.S. crude inventories rose by 592,000 barrels in the week ended September 13 to 422.5 million, data from industry group the American Petroleum Institute showed on Tuesday. Analysts had expected a decrease of 2.5 million barrels.

Official U.S. government data will be released later on Wednesday.

Amaka E. Nliam