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Saudi Arabia says it is no longer responsible for oil market stability

Saudi Arabia, the world’s largest exporter of crude, said March. 21 it no longer has “responsibility for any shortage in oil supplies to global markets in light of the attacks on its oil facilities,” according to a statement from the Ministry of Foreign Affairs reported by the official Saudi Press Agency.

The announcement comes a day after an attack on Yanbu Aramco Sinopec Refining Co. (Yasref) refinery claimed by Houthi militants in Yemen. According to the S&P Global Oil Security Sentinel, the kingdom’s oil and energy infrastructure has been targeted over 40 times since 2017, with the biggest incident occurring in 2019 when drone attacks hit the giant Abqaiq oil processing facility.

Furthermore, the statement called for international recognition that “Iranian backed” militants “target the kingdom’s production sites of oil, gas and refined products, resulting in serious consequences for upstream and downstream sectors affecting the kingdom’s production capability and it’s ability to fulfill its commitments, undermining without a doubt, the security and sustainability of energy supplies to global markets.”

However, despite these attacks, disruptions to the kingdom’s oil supplies have been limited. According to S&P Global data, only 80,000 b/d of output has been lost on average in Saudi over the last five years. The kingdom has capacity to pump over 12 million b/d of crude.

Riyadh has traditionally maintained a 2 million b/d spare capacity buffer, which it has used on request to help maintain global market stability during supply shocks such as the Gulf War in the early 1990s, or the US invasion of Iraq in 2003. However, Riyadh has so far refused to comply with international pressure to release more oil, or deviate from the OPEC+ deal with Russia on production, since international sanctions were imposed on the Kremlin.

Last week, UK Prime Minister Boris Johnson visited Riyadh for meetings with Crown Prince Mohammed bin Salman to plead for the kingdom to export more oil to help ease prices above $100/b as more western countries ban Russian supplies. The Saudi statement also comes as western powers and Iran appear to be closing in on a new nuclear deal that would relax sanctions on Iranian oil exports.
Source: Platts

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