After Abqaiq: A quick recovery and reasons to de-escalate

GULF COUNTRIES - Report 18 Sep 2019 by Rory Fyfe and Justin Alexander

Aramco says it’s restored Khurais output and about half of Abqaiq, with a full return to normal in two weeks. The oil market seems to believe Aramco, which we think can restore output before fully repairing the damage because the facilities had previously been operating below capacity. Aside from a dip in Q3 oil GDP, the economic impact on Saudi Arabia should be minimal, although Aramco’s IPO may be delayed into 2020. Other Gulf states will benefit from slightly higher oil prices although Bahrain may have to pay more for its forthcoming bond issuance. The risk of further attacks on oil infrastructure, which could not be so easily recovered from, should serve as an incentive for de-escalation in Yemen and with Iran, despite bellicose rhetoric.

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