(Bloomberg) -- Saudi Arabia’s Abqaiq plant has restarted and is now processing about 2 million barrels a day, restoring just under half the output lost after the facility was damaged in an attack, said Aramco Chief Executive Officer Amin Nasser.
The kingdom expects output at the facility to return to pre-attack levels of about 4.9 million barrels a day by the end of September, Nasser said at a briefing in Jeddah.
The long-awaited statement from the kingdom -- which before the strike pumped almost 10% of the world’s oil -- gives the market much-needed clarity over the worst sudden supply disruption in its history. However, it’s slower progress than the kingdom had initially expected.
Soon after the weekend attack, officials indicated that the majority of output would be restored within days, with weeks required to get back to full capacity. That outlook became more pessimistic in subsequent days as photos were released showing the scale of the damage at the crucial facility.
Figures provided by Saudi Energy Minister Abdulaziz bin Salman suggested the kingdom will take months to fully recover from the incident. Full output capacity of 12 million barrels a day will only be available at the end of November, with about 11 million restored by the end of this month, he said.
The oil market has been gripped with uncertainty since the attack -- initially claimed by Houthi rebels in Yemen, but later blamed on Iran by the U.S. Brent crude fell 5.1% to $59.67 a barrel in London. The international benchmark jumped the most on record on Monday.
That historic price gain underscored the unprecedented nature of the disruption caused by the attack. For decades, Saudi Arabia has been the oil market’s great stabilizer, maintaining a large cushion of spare production capacity that can be tapped in emergencies, such as the 2011 war in Libya.
The halt of 5.7 million barrels day of the kingdom’s production -- the worst sudden supply loss in history -- exposed the inadequacy of the rest of the world’s supply buffer. Aramco started up idle offshore oil fields to replace some of the lost production, a person familiar with the matter said earlier this week. Customers were also being supplied using stockpiles, though some buyers are being asked to accept different grades of crude.
But beyond the kingdom, other participants in the OPEC+ cuts, such as Russia, Kazakhstan and the United Arab Emirates, could restore a few hundred-thousand barrels a day of idled production, but not enough to offset the Saudi losses.
Escalation Threat
Even as Aramco fixes the damage at Abqaiq, the possibility of further escalation of conflict in the Middle East hangs over the market.
Tehran and Riyadh are historic foes that have been backing opposite sides in Yemen’s long-running civil war. The volatile situation in the region finally boiled over earlier this year as U.S. President Donald Trump used sanctions to attempt to choke off all of Iran’s oil exports -- which are the lifeblood of its economy -- after he unilaterally withdrew from an international nuclear deal.
Understanding the Conflicts Leading to Saudi Attacks: QuickTake
Since then the Persian Gulf, source of about a third of the world’s seaborne oil exports, has been under siege -- targeted by air, sea and land. While Trump has shown some reluctance to go to war, there are also few prospects for easing tensions as Saudi Crown Prince Mohammed bin Salman decides how to respond to the assault.
The Pentagon is preparing a report on who was responsible for the weekend attack on Saudi oil facilities and intends to make it public within 48 hours, a U.S. defense official said on Tuesday.
Houthi rebels in Yemen, who are backed by Tehran, said on Monday that oil installations in Saudi Arabia will remain among their targets and their weapons can reach anywhere in the country. Iran’s supreme leader Ayatollah Ali Khamenei said on Tuesday that his country won’t negotiate with the U.S. on any level neither in New York or anywhere else.