The fingers are all pointing to Iran. Britain, France, and Germany are now blaming Iran for this month’s attacks on Saudi Arabia. UK Prime Minister Boris Johnson, President Emmanuel Macron of France and Chancellor Angela Merkel of Germany issued a joint statement where they agreed that Iran was responsible for the attack on Saudi oil processing plant and oil field. While they still support the previous JCPCA nuclear deal, they say, "the time has come for Iran to accept a long-term negotiation framework for a nuclear program, regional issues JCPOA nuclear deal, & missiles.” This statement raises pressure on Iran and it appears that Iran’s lashing out in regard to the maximum pressure campaign has pulled the rest of the world closer to President Trump’s view that the deal was a bad one and needs to be renegotiated.
Trump’s policy seems to be working mainly because Iran has tried to goad the U.S. into military action but because President Trump has shown restraint, it now makes Iran look like an unhinged aggressor. The attacks on Saudi Arabia put Iran in the position of attacking a sovereign nation and then trying to deny it. President Trump said he welcomed moves for a broader agreement. President Trump also called on the UN to protect religious people from persecution. He said that the U.S. is dedicating $25 million more towards religious freedom.
Talks with Iran and promises by Saudi Arabia that oil production will be soon back to normal is weighing on prices in the early going. Reuters reports that, “Saudi Arabia has restored more than 75% of crude output lost after attacks on its facilities and will return to full volumes by early next week, a source briefed on the latest developments. Saudi oil production from its Khurais plant is now at more than 1.3 million barrels per day, while current production from its Abqaiq plant is at about 3 million bpd, the source said. The September 14 attacks on the two giant plants caused raging fires and damage that halved the crude output of the world’s top oil exporter, by shutting down 5.7 million barrels per day of production. Saudi Energy Minister Prince Abdulaziz bin Salman and the chief executive of state oil company Aramco, Amin Nasser, have said output will be fully back online by the end of September.”
Yet while production may be back, Saudi Arabia’s ability to refine it will not. Saudi Arabia may end up producing a lot of oil that no one wants because the Saudi’s cannot process oil to the grade their customers want. Bloomberg reported that, "State-run Saudi Aramco reduced refinery run rates by 1 million barrels a day after the attacks to make more crude available for export. The kingdom’s oil inventories are down 8.4% since the strike, according to Orbital Insight." And while the Saudis are focused on exports of oil, product shortages of gasoline are showing up at home. The Wall Street Journal reported on Monday repairs at the plants could take months longer than anticipated. Reuters says that, "Thousands of employees and contractors have been pulled from other projects to work around the clock in bringing production back. Aramco is shipping equipment from the United States and Europe to rebuild the damaged facilities, Aramco officials told reporters on Friday." In the meantime, oil traders are waiting to see what if anything comes next.
The crude oil market may bounce if we get more news on U.S./China trade. Word that China granted tariff waivers for U.S. soybean imports of between 2-3 million tons seemed to raise hopes that China is in the mood to deal. Or maybe they are hungry.
Then we get supply. Oil sold off on reports that supply in Cushing, Oklahoma saw a surprise increase. Yet all eyes will be on U.S. oil and product exports that should surge this week and in the weeks to come.