According to analysts and industry experts, Saudi Arabia currently is now using the crude stored with it to fill in the gap in global crude supply that has resulted because of the drone attacks on an oil facility of the Saudi oil giant Saudi Aramco last Saturday, and therefore the capacity of the kingdom, the largest oil producer of the oil cartel OPEC, to quickly fill the gap in the global crude market will only be seen after the next few weeks.

It will take just two or three weeks for bringing back production to normal, Saudi Arabia has stressed, which translates to renewed production of about 10 million barrels per day (bpd). The two ties that were damaged by Saturday’s attack generally has a processing capacity of about 5.7 million bpd of crude oil.

Saudi Arabia has assured that it will keep up adequate supply of crude oil in the physical crude market, drawing from its reserves based in Saudi Arabia and abroad and the total volume of that capacity is believed to be about 180 million barrels as of July. In the mean time, the kingdom would continue to repair the damages opt the facility.

However there are doubts about how fast the country could be able to repair the damages to the Abqaiq and Khurais sites and at the same time, there is skepticism about the whether Riyadh can keep markets supplied without disruption given the sheer lack of transparency about Saudi inventories.

“A lot of October arrival barrels were already on the water so the hole is going to show up towards late October,” one senior European oil trader said. “There has been a mad scramble on the paper markets but the physical scramble will come later.”

Therefore, the level of inventories remaining with Audi Arabia and the time period the reserves can last so that the demand from its clients for crude are satisfied will determine the exact time of increased demand in the physical crude market.

About 8 million barrels in the month of July were filled by Saudi inventories at home and abroad – the data latest available monthly data, which took the reserves to 180 million barrels, said the Joint Organisations Data Initiative (JODI), an agency that issues energy data using submissions by its members such as Riyadh.

However the “big unknown” was the accuracy of the JODI figures, said one veteran oil trader and added that “overground tracked volume total would appear to be smaller” while referring to calculation that have been done by data analytics firms with the help of satellites to measure storage. The uncertainty about the level of Saudi stockpiles is further deepened by the recent moves to buy refined products by state-run Saudi Aramco’s trading arm Aramco Trading Corp (ATC), said the trader.

“There was talk of tens of billions invested over two decades to construct underground storage which one suspects contain largely products. But why then have we seen ATC come out and buy products?” he said.

(Adapted from Reuters.com)

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