GTA gas prices poised to spike after drone attack on Saudi oilfield
|Toronto Star 16 Sep 2019 at 13:21|
Gas prices in the GTA could rise by as much as 12 cents a litre in the wake of the drone attacks on Saudi-owned oil facilities that knocked out nearly 6 per cent of global crude supply and sent benchmark prices soaring Monday.
But how much pain consumers will feel depends on how quickly production can be restored, and with the switch to cheaper winter gasoline blends cushioning some of the blow, according to some experts.
Boston-based fuel price search firm GasBuddy predicts an increase of five to 12 cents for a litre of regular gas in the Toronto region due to the disruption, with the price to rise gradually over coming weeks.
“It may be more,” if the Saudis can’t restore output as quickly as they had indicated, said GasBuddy petroleum analyst Allison Mac.
Mac’s firm forecasts the impact across North America beginning mid-week and continuing until state-owned oil company Saudi Aramco is able to restore all production. Aramco initially said if hoped to restore a third of lost output by Monday, but has tempered that outlook and given no timetable for full recovery.
Roger McKnight, chief petroleum analyst with En-Pro International Inc., said he expects the price per litre for regular gas will increase by about six cents Wednesday in the GTA and across eastern Canada, and by slightly less west of Thunder Bay.
He said the hike will be a bit more for diesel, adding that uncertainty over the perpetrators and timing of restoration creates a circumstance with “no logical end in sight,” while also making the case for more pipeline capacity to ship Alberta oil east. He said Saint John, N.B.-based Irving Oil relies on crude supplies from the Saudis as well as Russia.
McKnight said the impact depends on the response in the U.S. where President Donald Trump has vowed to tap petroleum reserves and expedite approvals for pipelines in Texas and other states. All of that will take time, McKnight added, noting that the sudden removal of significant supply means “all the spare capacity is pretty well gone.”
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En-Pro says gas prices are at an average price of $1.16.9 a litre at most GTA gas stations.
Mac of GasBuddy said fallout from the disruption would have been more severe if it had occurred during the peak summer driving season. Energy expert Dan McTeague noted that the switchover to less energy-consuming winter blends begins this week, which could lower pump prices.
Saudi Arabia can restart a significant volume of the halted oil production within days, but needs weeks to restore full output capacity, people familiar with the matter said. The kingdom — or its customers — may use stockpiles to keep supplies flowing in the short term.
Saudi Arabia’s Abqaiq processing facility and the Khurais oilfield were attacked over the weekend by drones leading to fires that have sidelined around 5.7 million barrels of oil that would otherwise have been pumped daily.
There were no injuries from the attack, but Aramco CEO Amin Hassan Al-Nasser told the Saudi Press Agency that it could take some days to restore production. On Sunday, Trump said the U.S. would open its strategic reserves to plug any deficit and said he would expedite the approval of pipelines in Texas and other states.
Crude posted its biggest ever intraday jump to more than $71 (U.S.) a barrel after the strike that the U.S. has blamed on Iran.
London’s Brent futures leapt almost $12 in the seconds after the open, the most in dollar terms since they were launched in 1988. Prices have since pulled back about half of that initial surge of almost 20 per cent, but were still heading for the biggest advance in almost three years.
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The Toronto Stock Exchange’s S&P/TSX composite index energy sector climbed 3.8 per cent higher at the open Monday after the price spike with the loonie tipped to rise as well.
For oil markets, it’s the single worst sudden disruption ever, and while Saudi Arabia may be able to return some supply within days, the attacks highlight the vulnerability of the world’s most important exporter. They also add further political risk to prices, raising the spectre of more destabilization in the Middle East and the threat of U.S. retaliation against Iran.