Oil drops sharply as Saudi output seen returning soon after attacks

Oil prices dropped sharply on Tuesday after a top Saudi Arabian source told Reuters that production could be fully back on line within weeks.

This is quicker than initially thought following weekend attacks that halved the kingdom’s output.

Saturday’s attacks raised the specter of a major supply shock in a market that in recent months has been preoccupied with demand concerns and faltering global growth. Oil surged as much as 20% at one point on Monday.

Production could be fully online within two to three weeks and the kingdom was close to restoring 70 percent of the 5.7 million barrels a day lost after the attacks, a top Saudi source briefed on the latest developments was quoted to have said by the news outfit.

Brent crude LCOc1 was down $3.72, or 5.4%, at $65.30 a barrel by 1350 GMT. West Texas Intermediate CLc1 was down $2.40, or 3.8%, at $60.50 a barrel.

In the immediate fallout from the attacks, state-owned producer Saudi Aramco told some Asian refiners it would meet its oil commitments, albeit with changes, sources said.

Saudi energy minister Prince Abdulaziz bin Salman will hold a news conference at 1700 GMT.

“All eyes will be on the Saudi news conference,” said Samuel Ciszuk, founding partner at Stockholm-based ELS Analysis.

“We need a proper damage assessment, we need to see a recovery plan. Before that, we don’t really know how much oil will be offline for how long and that’s the basic question people having been posing since Saturday.”

The attacks on crude-processing facilities at Abqaiq and Khurais resulted in the largest single supply disruption in half a century, and threw into question Saudi Arabia’s status as supplier of last resort.

Some Asian refineries are expected to receive their allocated volumes for October, while other importers are being told of delays or being offered alternative grades.