|19 September, 2019

Saudi oilfield attacks 'had zero impact on economy'

Weekend strikes failed to interrupt market supply or revenue flow, Kingdom's finance minister says

Image used for illustrative purpose only. A gas flame is seen in the desert near the Khurais oilfield, about 160 km (99 miles) from Riyadh.

Image used for illustrative purpose only. A gas flame is seen in the desert near the Khurais oilfield, about 160 km (99 miles) from Riyadh.

REUTERS/Ali Jarekji

LONDON: Saudi Finance Minister Mohammed Al-Jadaan said that the weekend attacks on the Kingdom’s oil infrastructure would have “zero” impact on the country’s economy as concerns about global oil supplies eased.

“In terms of revenues there is zero impact,” Saudi Finance Minister Mohammed Al-Jadaan told Reuters in an interview on the sidelines of an investor conference in Riyadh.

“Aramco continued to supply the markets without interruption and therefore revenues should continue as they are.”

In a separate interview with Bloomberg, Al-Jadaan said that after a boost to state spending, the government was “seeing momentum” in the non-oil economy and that he expected the sector to hit the 2.9 percent expansion forecast by the International Monetary Fund. Oil prices retreated after the comments, having jumped more than 20 percent at one point on Monday — the biggest spike since the 1990-91 Gulf War.

The International Energy Agency (IEA) said on Wednesday it remained in regular contact with authorities in Saudi Arabia and that for now, markets remain well supplied with ample stocks available. 

IEA member countries hold about 1.55 billion barrels of emergency stocks in government-controlled agencies, which amount to 15 days of total world oil demand. 

In addition, IEA member countries also hold 2.9 billion barrels of industry stocks as of the end of July, a two-year high that can cover more than a month of world
oil demand, the Paris-based agency said.

These stocks include about 650 million barrels of obligated emergency stocks, which can be made immediately available to the market when governments lower their holding requirements.

“Recent events are a reminder that oil security cannot be taken for granted, even at times when markets are well supplied, and that energy security remains an indispensable pillar of the global economy,” said Fatih Birol, the IEA’s executive director.

“This is why the IEA remains vigilant about the risk of disruptions to global oil supplies.”

The Saudi stock market gained 0.6 percent on Wednesday and Saudi dollar-denominated bonds also recovered after retreating on Monday. Earlier Commerzbank said that the oil price rally that followed the attacks was not sustainable and, despite rising regional tensions, lowered its 2020 price forecasts because of slowing demand growth.

The bank cut its Brent forecast for next year by $5 to $60 per barrel and kept its 2019 outlook unchanged at $65.

It also reduced its 2020 forecast for WTI to $57 from $62. Commerzbank forecast WTI to average $58 this year, Reuters reported.

While the attacks had “painfully demonstrated the risks to oil supply,” raising the possibility of short-term price spikes, prices should fall again in the coming weeks as long as there is no “total escalation of the situation,” analysts said.

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