Both the PSI and BVSC securities companies share the same idea that oil price will only fluctuate for a short time due to the effect of Arab Saudi. However, BVSC hopes that this development can generate positive psychological support, thus helping the Oil and Gas shares to increase their points.
Last week, on 14th September, 2 Saudi Arabian crude oil factories in Abquaiq and Khurais was attacked by unmanned aircraft. The oil product of Arab Saudi has decreased by 5.7 million barrels/day since then. The WTI oil increased by 10% in the morning session on Monday, 16th
September in the Asian market.
The PSI Security Incorporated (PSI) has just had a report evaluating the oil price development after Arab Saudi was attacked. According to them, Arab Saudi will have to face a decrease of 5.7 million barrels/day in production – equaling to half of the national production and 5% of the global production.
Saudi Aramco reports they can restart production in a few days, and will announce the detailed information within 48 hours. However, the short-term oil price fluctuation, which will be determined by the length of the downtime, can affect the global inventory.
PSI deems that the complete reconnection of production of the biggest crude oil exporters in the world will
last a few weeks. PSI also says that the oil price can unexpectedly increase for a short term if the downtime of the two factories is prolonged. However, Arab Saudi still has millions of reserved oil barrels in all over the world, and America and OECD nations may “liberate” crude oil from their strategic reserve to meet the demand.
The effects on major importers of the Saudi Arabian crude oil may not be too serious. Prior to the unmanned aircraft attack, the total crude oil production of Saudi Arabia was 9.83 million barrels per day, with around 70% (6.8 million barrels) used for export, in which China accounts for 25% of the crude oil export in August, Japan accounts for 12%, India accounts for 11%, and Korea accounts for 10%.
PSI thinks that the risk of material supply disruption in Japan, Korea, and India will be higher than that of China, which will not be worth mentioning as China currently is owning a reserve of crude oil of around 400 million barrels.
Short-term impacts can create fluctuation in the oil price of more than 8 USD/barrel because the situation in the Middle East is becoming fragile. In addition, the second price increasing section on 16th
September was also a result of the uncertainty regarding losses and the length of downtime, and the probability of repeating surprise events.
However, if the tension does not increase and the downtime does not last too long, the oil price will possibly fluctuate at around 5 USD/barrel in many upcoming weeks because the consuming demand of the market is still fulfilled by the strategic reserves.
Sharing the same idea, Bao Viet Securities Companies also thinks that the effect of the attack will not be long-term for the following reasons:
Firstly, the damage of this attack is not too grave and both factories are estimated to recover their capacity in this week or the next.
Secondly, the decrease in oil production happens in the context of the global economy significantly slowing down, therefore the oil needs in the world are also slowed down notably and compensate for the lack of supply caused by the attack.
Even though it is expected to be short-term, BVSC still hopes that this development can create positive psychological support to help the Oil and Gas shares to gain points.