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Saudi Arabia working to bring output back online

Only a third of offline production might be restored by the end of Monday following drone strikes

Saudi Arabia is aiming by the end of Monday to restore a third of the 5.7 million barrels per day of production taken offline over the weekend by drone strikes on two key facilities.

The Wall Street Journal cited Saudi officials as saying it was anticipated roughly 2 million bpd of production would be restored by the end of the day on Monday, dashing hopes that full production could resume early this week.

Drone assaults knock out 5.7m bpd of Saudi output

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“This attack has material implications for the oil market, as a loss of 5 million barrels per day of supplies from Saudi Arabia cannot be met for long by existing inventories and the limited spare capacity of the other Opec+ group members,” from Wood Mackenzie vice president for refining, chemicals and oil markets, Alan Gelder, said Monday.

“A geopolitical risk premium will return to the oil price.”

The drone strikes on the Abqaiq and Khurais facilities knocked out more than half of Saudi Arabia’s production over the weekend, sending oil prices soaring in early trade on Monday, with Brent prices jumping as much as 19% from Friday’s close in early trade, and US crude rising more than 15%.

However, prices retreated slightly after US President Donald Trump approved the release of oil, if needed, from the US Strategic Petroleum Reserve (SPR) in a quantity to be determined.

Trump also stated on Twitter that he had informed “all appropriate agencies to expedite approvals for the oil pipelines currently in the permitting process in Texas and various other states”.

Oil soars after attack on Saudi facilities

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Yemei Houthis, which are engaged in a war in Yemen with Saudi Arabia, have claimed responsibility for the attacks, however, the US has claimed Iran is behind the drone strikes.

US State Secretary Mike Pompeo claimed via Twitter that Iran had “launched an unprecedented attack on the world’s energy supply”, while adding there was no evidence the attack came from Yemen. However, he did not state what evidence the US had that the attacks were orchestrated by Tehran.

Meanwhile Trump claimed the US was “locked and loaded” to respond to the attacks.

“There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!” he said via his Twitter account.

Iran however has denied involvement in the attack, while its elite Revolutionary Guard has stated that it is ready for “full-scale war” should the US look to launch military action.

A senior Revolutionary Guard commander, Amirali Hajizadeh was quoted by the Al Jazeera as saying that while neither Iran nor the US wanted a war, the region was “like a powder keg”.

“When these contacts come too close, when forces come into contact with one another, it is possible a conflict happens because of a misunderstanding," he was quoted as saying.

"Of course some forces facing each other in the field could do something by which a war could start. We have always prepared ourselves for a full-fledged war."

According to Hajizadeh, Iranian forces are ready to retaliate to any US military action, naming the Al-Udeid Air Base in Qatar and Al-Dhafra Air Base near Abu Dhabi as immediate targets, as well as navy ships in the Gulf and the Arabian Sea.

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