Saudi Aramco, a Saudi Arabian oil and gas giant, has said the company will return to full production capacity by the end of the month following a drone attack on the world’s largest oil processing facility last Saturday.  As previously reported, oil prices on Monday saw the biggest surge since 1991 following the attack on Saudi Aramco’s oil processing facilities Abqaiq and Khurais in Saudi Arabia. The prices surged by as much as 19% in early trade on Monday before easing off to show a 10% gain after the U.S. President Trump said he would release the U.S. emergency supplies. The attack resulted in the interruption of about 5.7 million barrels per day of crude oil production. Of these, 4.5 million barrels per day are from Abqaiq plants, where production is processed from several fields. The interruption of production also included about 2 billion cubic feet of associated gas, 1.3 billion cubic feet of dry gas, 500 million cubic feet of ethane and about half a million barrels of gas liquids. On Tuesday, oil prices plunged by 6% after Saudi Arabia’s energy minister Prince Abdulaziz bin Salman told journalists at a press conference that the country had managed to restore oil supplies to customers to where they stood before the attacks by drawing from its huge inventories, according to Reuters. The minister also said that the Kingdom’s production capacity would return to 11 million barrels per day by the end of September, and to 12 million barrels per day by the end of November. Entire output restored by September-end Saudi Aramco President & CEO Amin Nasser said on Tuesday that the company’s production capacity would be fully restored by the end of September. Speaking to media in Jeddah during a news conference with Prince Abdulaziz Bin Salman, Minister of Energy, and Yasir Rumayyan, Chairman of Saudi Aramco, Nasser said: “These synchronized attacks were timed to create maximum damage to our facilities and operations. The rapid response and resilience demonstrated in the face of such adversity shows the company’s preparedness to deal with threats aimed at sabotaging Aramco’s supply of energy to the world.” During the news conference, it was disclosed that production at Khurais resumed 24 hours after the attack. Meanwhile, Nasser stated that production at Abqaiq is currently 2 million barrels per day and its entire output is expected to be restored to prior rates by the end of September. “We have a hard-earned reputation for nearly 100 percent reliability in terms of meeting our international customers’ requirements and we have defended that,” he told journalists from Saudi and international media as reported by offshoreenergytoday.com. The company adjusted deliveries and shipments to customers by drawing on inventories and offering additional crude production from other fields. “Not a single shipment to an international customer has been or will be missed or canceled as a result of these attacks. We have proven that we are operationally resilient and have confirmed our reputation as the world’s leading supplier,” Nasser said. “The company has met its commitments to its International customers, even in challenging situations, including past Gulf conflicts.” No delays to IPO  The subject of the company’s Initial Public Offering was also discussed during the news conference and Nasser had the following message: “We have said we are ready and will proceed with the IPO when our shareholder takes the decision.” Saudi Aramco Chairman Rumayyan said in his statement during the press conference that the attacks “will not delay the initial public offering of Aramco and will not delay its preparations.” “The planned IPO of the national oil giant will be ready in the next 12 months and the kingdom is committed to the listing,” he added. Risk scenario becomes reality Following what was described as the largest single disruption of oil production in history, IHS Markit, a London–based global information provider, developed three scenarios for the potential market impact of the Saudi oil attack. In the first scenario, the Abqaiq plant flows prove to be entirely addressable within the next two weeks, with an initial restart early this week followed by a measured ramp-up thereafter. This would lead to a gross disruption in the 30-60 MMbbl range and should be manageable through any combination of Saudi stocks and global commercial inventories, with Saudi Arabia ostensibly surging post return to offset the net tightening caused by its temporary decline. This remains a low-likelihood scenario, with the extent of the attack suggesting at least some level of sustained damage affecting production levels. The second scenario is, according to IHS Markit, the most likely. Saudi Arabia is able to manage a partial return from the peak disruption of 5.7 MMb/d but it is unable to address the full extent of the damage on key facilities for as long as four months. The gross disruption could increase into the 150-300 MMbbl range. This would exceed the ability of commercial inventories to meet the shortfall leading to higher prices. Global markets will likely look to extraordinary measures to mitigate the physical shortfall caused by the disruption, including a coordinated SPR stock release from the IEA, a potential call on China to ease market pressure through inventories, and call for increases in production from within the Vienna Alliance. On each of these fronts, the magnitude of the extended disruption becomes key given flow (for inventories) and capacity (for production) limitations. The final scenario of 120+ days is the worst-case scenario, where output is out for months and the physical shortfall rises into the 350-500 MMbbl range. In this scenario, prices spike and extraordinary measures like SPR releases would be needed but would be insufficient and ultimately the market would require demand and eventually reactive supply such as the US (via higher prices) to correct for the structural imbalance in the market. Given the high priority of the facility to Aramco and the company’s prioritization of repairs regardless of cost, a stacked return means that it is unlikely that a full shutdown endures beyond 4 months unless damage is more extensive from the attacks than anticipated, or a large-scale conflict breaks out. “What was a risk scenario has become a reality,” said Daniel Yergin, vice chairman, IHS Markit. “The amount of Saudi oil offline is equivalent to one third of what passes every day through the Strait of Hormuz. Two things will jangle the oil market in coming days—how long the recovery and what comes next.” “Under any scenario, the heightened risk premium marks a stunning reversal for the market,” said Roger Diwan, vice president, IHS Markit. “The combination of weak demand fed by macroeconomic fears and the potential for a U.S.-Iran détente unlocking significant volumes of oil currently under sanction had weighed on the market. Now an enduring increase in the market’s risk premium is justified.”