The U.S. shale boom was one of the reasons why oil prices didn't soar to triple digits when more than half of the oil production of the world's top oil exporter Saudi Arabia was knocked offline by attacks in the middle of September, Andy Critchlow, head of news in EMEA for S&P Global Platts, said in a blog post on Monday.
The September 14 attacks on Saudi oil infrastructure knocked 5.7 million bpd-or 5 percent of global oil supply-offline. Immediately after the attacks, the oil market went into panic mode early last week, with prices jumping by the most on record last Monday.
Oil prices could test the US$80 a barrel Brent Crude price, following the attacks, S&P Global Platts Analytics said immediately after the two vital Saudi facilities went offline.
However, later in the week, oil prices eased off after Saudi Arabia started to insist through official statements and sources that it would fully restore oil supply by the end of September.
By Friday, Brent Crude was already trading very close to its year-to-date moving average of US$64 a barrel.
According to analysts who spoke to Critchlow, slowing oil demand growth, soaring U.S. shale production, and assurances that stocks and reserves around the world could meet supply crunches in the short term were the key drivers for oil prices to retreat from the initial shock when they had soared 20 percent in one day.
Warren Patterson, ING's Head of Commodities Strategy and Senior Commodities Strategist Wenyu Yao,
By Tsvetana Paraskova for Oilprice.com
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Comments
The reason is to be found in two interconnected bearish factors: the trade war between the United States and the glut in the global oil market.
The trade war has created uncertainty in the global economy dampening global investments and depressing the demand for oil and also prices. It has also expanded an already existing glut in the market from probably 1.5-2.0 mbd before the war to an estimated 4-5 mbd. That is why the global oil market was able to take the shock of a loss of 5.7 mbd from Saudi oil production in its stride.
Another supporting factor is Saudi stored crude oil estimated at 130 million barrels (mb) of which some 50 mb in storage on land and another 80 mb at ports around the world.
If not for these two factors, oil prices would have surged to $75 a barrel
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London