(WCTW) Trying To Make Sense Of This Oil Market

We are definitely in the Twilight Zone, but let's at least try to understand.

Wow, -10.9% on Brent on the heels of the Houthis attacking Abqaiq is now officially in the “that makes no sense” bucket. File that along with so many other things that are so detached from reality that it is hard to fathom anyone in energy having a career after this.

If the oil barrel counters were starting to question their own very existence over the last 3 months, today’s geopolitical event + the price action should officially signal to everyone in the oil market forecasting bracket a time to wave the white flag.

No, none of this makes any sense. Abqaiq, which handles ~7 million b/d of Saudi crude oil processing, was targeted this morning by the Houthis. OSINT accounts and others have pointed out that the attacks appear similar to the one from 2019, which saw Saudi reduce production by ~5 million b/d for 2 weeks.

Now couple this with the fact that the Bab al-Mandeb Strait is closed to Saudi-linked vessels, crude export loading in Yanbu has dropped ~1.5 million b/d week-over-week, and Saudi crude oil production shut-in is now closer to ~6 million b/d versus ~3.5 million b/d a week ago. The context of the oil price sell-off really doesn’t make any sense.

But I will attempt the impossible here. I will try to make sense out of this nonsense.

Making Sense

Based on the current crude loading activity out of the Middle East and the latest Abqaiq incident, crude oil production shut-in math requires an update.

Production shut-in in million b/d:

Saudi - 6

Iraq - 3

UAE - 0

Kuwait - 1.7

Iran - 1.1

Qatar - 1.1

Bahrain - 0.17

Total: 13.07 million b/d

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