Saudi drone strikes: No crude blow to India yet
NEW DELHI: Indian refiners do not see an immediate disruption in crude supplies after the drone strikes on Saudi Arabia’s oilNSE 1.43 % processing facilities on Saturday, though prices may witness a short-term spike.
A delayed restoration of the damaged facilities may, however, trigger a search for alternative supplies.
The drone attacks by West Asian rebel groups have hit 5.7 million barrels per day of production, which represents nearly half of the kingdom’s output and 6% of global crude supplies. This has raised supply risk as well as price risk for refineries across the world, including India, which imported about 19% of its crude from Saudi Arabia last fiscal.
Indian Oil, India’s largest refiner, is watching the situation closely.
Tapping Oil Reserves
It will take a call once more clarity emerges on the supply situation over the next few days, a company executive said. Hindustan Petroleum too is on a wait-and-watch mode. “As per the news, we are hearing that Saudis have not declared force majeure and plan to meet supply commitments to their clients from their stock. But we will have to see how long it takes them to resto ..
Saudi Arabia said it will tap its vast storage to supply its clients. An immediate supply disruption looks unlikely since producers, refiners and ships on the way to refineries usually have enough inventory to provide for the next few week’s requirements, oil industry executives said. Analysts, however, cautioned of short-term price spike.
The current production trouble may not lead to a major global supply imbalance as Saudi Arabia is no more the single biggest influence on the oil market and other key producers such as the US and Russia can easily step in and offer more supplies, Surana said. The US and Europe also have the option of tapping their strategic reserves. India, too, can draw from its strategic storage built recently.
“The IEA is monitoring the situation in Saudi Arabia closely. We are in contact with the Saudi authorities as well as major producer and consumer nations. For now, markets are well supplied with ample commercial stocks,” the International Energy Agency said.
The attack has sharply raised tension in the Gulf region. “There has been nearly zero geopolitical risk in the oil market for a while now, partly because of OPEC ineffectiveness and partly because of shale production growth. This scale of production disruption and potential retaliation could reintroduce political risk and also drain inventories,” said Josh Young, CIO at Bison Interests LLC, in an agency report.
The Economic Times 16-09-19