48 hours ago, the million-dollar question for hedge funds was when the Saudis would be able to bring production back up to full capacity after the multiple, surgical strikes on Aramco facilities Saturday. Supply has now been largely restored, and the damage has been clarified after much panic.
The worst strikes in terms of visible damage based on satellite imagery were the processing facilities at Abqaiq (image 1), with the lower far-left infrastructure being the hardest hit, and to a lesser extent, the Khurais oilfield, which is 180KM southwest of Abqaiq (image 2):
Abqaiq is the key here.
Lack of clarification wreaked havoc on the market for a couple of days, with the Saudis downgrading an initial estimate that they would be able to get significant capacity back online in a matter of days. On Monday, that estimate was changed to a vague range of weeks or months as officials continued to assess the damage and necessary repairs.
On Monday, we advised private clients that there is enough Saudi domestic storage to last just shy of a month, and that the rest would be made up from bringing idle fields back online, while in the end, the effect on the market in terms of supply and demand would be less dramatic than the initial jump in oil prices warranted.
By Tuesday, the markets had largely forgotten about the attack from a technical standpoint. Oil prices pared gains, and the market shifted its focus back to the Fed. The Saudi energy…