Orbital Insight Energy Spotlight: Houthi Abqaiq Attack

With regard to the current situation in Saudi Arabia, Orbital Insight continues to monitor all 639 domestic tanks that hold 191mm barrels of shell capacity as well as track shipments from its export locations. We will continue to update you with our proprietary insights on Saudi progress in returning to normal production levels.

Executive Summary

• Saudi Arabia’s largest export facility, Ras Tanura, has 7 days of inventory according to Orbital Insight tank inventory observations and average AIS tracking based loadings of 3.4mm/d. This is a key metric as Saudi Arabia seeks to return to normal production levels.
• Global inventories are unevenly distributed among key consumers — with China in the best shape, South Korea and Japan at low levels — owing to ongoing Iranian export sanctions
• U.S. export infrastructure is maxed out. If the interruption continues for an extended period, U.S. Strategic Petroleum Reserve (SPR) releases will only accomplish making up for a reduction in imports in the short term. This still presents a challenge since the tankers are out of position for timely deliveries to Asia and Europe and would impact continued adequate supply.
• Orbital will continue to monitor tank levels on a daily basis to gauge production recovery progress.

Full Analysis

Following the Houthi-attributed attack on Saudi Aramco’s key Abqaig and Khurais oil processing facilities, Orbital Insight has observed global inventories at high levels with materially uneven distribution among key importers and producers. Supply alternatives are limited as the U.S. export infrastructure is maxed out. China and India are well supplied carrying a combined 58mm YoY surplus. OPEC is 22mm above last year with Iran’s struggles to move oil accounting for 16mm of the builds.

Saudi inventories are only 1.7mm barrels above last year, including declines preceding the attack this weekend. Key Saudi export terminals are mixed. Ras Tanura’s 34mm of stocks is in line with last year. Yanbu’s 15mm is 1.2mm below last year. Forward-staging areas for KSA oil are below last year as Sidi Kerir in Egypt stands at 10mm. Existing inventories at Ras Tanura show 7 days’ worth of loadings, given AIS observed average exports of 3.4mm/day over the past month, and RT refinery consumption of 550mb/d with 3.4mm of estimated unusable tank heels.

Key Saudi importers are caught dealing with imbalances, further compounded by Iranian export sanctions. South Korea’s 12mm deficit is 20% below last year and Japan has a modest 3mm or just under 1% YoY gap. Given longer transit times, OECD Asia consumers will have to act aggressively with their SPR releases if the outage persists for more than a few days. China and India are in decent shape, but they too will be prepared to implement SPR release and conservation measures in short order.

Mediterranean refiners are flat vs. last year indicating that any material uncertainty to their crude oil buying cycle will force aggressive action to secure alternative supplies. Russia, a key medium sour exporter stands to benefit, just as it has with the loss of Iranian oil.

Resupply Options

Orbital Insight has observed decreasing inventories in the U.S. Permian basin in line with aggressive draws occurring in the U.S. It is critical to note that U.S. export infrastructure is maxed out and investor concerns around shale profitability are causing drilling slowdowns. The result is that regardless of an SPR release, the U.S. will be hard-pressed to export any additional oil into the world market. An SPR release would allow some U.S. import rejection, freeing oil to be purchased on global markets, much of which will not be positioned to reach key consumers in a timely way.

While damage assessments continue, it is important to define the existing situation then analyze forward implications from a rapid recovery to a prolonged outage. As analysts of all types continue to review imagery of the ongoing smoke and plumes, and it is noteworthy that OI and others have observed that the smoke appears to be coming from process safety vent flares and not from the production facility itself. While still preliminary, this may offer hope that the recovery process will not be prolonged.

Recovery

Publicly released government imagery just reviewed appears to show more extensive damage to spherical tanks and a processing area which may delay recovery timing. As assessments continue, Orbital Insight will continue to provide daily inventory and other updates.

Key Inventories

This analysis was conducted using Orbital Insight’s mult-source geospatial platform. To learn more about the recent attacks or conduct your own analysis, contact info@orbitalinsight.com.