Saudi Production Outage Sends Global Crude Oil Prices Soaring

(September 26, 2019) — The Energy Information Administration (EIA) writes that the Sept. 14 attack that damaged the Saudi Aramco Abqaiq oil processing facility and the Khurais oil field in eastern Saudi Arabia caused Brent and West Texas Intermediate (WTI) crude prices to experience their steepest single-day increase in a decade Sept. 16. The Abqaiq facility is the world’s largest crude oil processing and stabi- lization plant, with a capacity of 7 MMbbld, or about 7% of world oil output capacity.

On Sept. 17, Saudi Aramco reported that Abqaiq was producing 2 MMbbld and it expected output to be fully restored by the end of the month. In addition, the company said crude exports to customers would continue uninterrupted, enabled by drawing on existing invento- ries and additional production from other fields. Tanker loading estimates from third-party data sources indicate that loadings at two Saudi Arabian export terminals were restored to pre-attack levels. Likely driven by news of the expected return of the lost production, both Brent and WTI prices fell Sept. 17.

EIA notes that crude oil prices are the biggest factor for the retail price of gasoline, the most widely consumed transportation fuel in the U.S. Each dollar per barrel of sustained price change in crude oil translates to an average shift of about 2.4 cents/gal. in petroleum product prices. On Sept. 16, U.S. average regular retail gasoline prices averaged $2.55/gal., according to the agency’s Gaso- line and Diesel Fuel Update.

(SOURCE: The Weekly Propane Newsletter, September 30, 2019. Available by subscription.)