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MoneyWhat the attack on Saudi oil facilities could mean for Canada's oilpatch and Keystone XL

12:01  17 september  2019
12:01  17 september  2019 Source:   cbc.ca

A US woman's divorce battle in Saudi Arabia shows the nightmare foreign women can face in its labyrinthine legal system

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The Abqaiq oil processing facility targeted by the attack is some 330 kilometres northeast of the Saudi capital of Riyadh. (CBC). Roger McKnight, chief petroleum analyst at En-Pro International, says the impact of the attack on Saudi oil facilities likely means higher gasoline prices in Canada

NEW YORK (Reuters) - The attack on Saudi facilities on Saturday caused the biggest oil supply disruption for more than 50 years. Here is what it could mean for consumers: Where will I feel the cost increases? Consumers around the world could see costs rise for products ranging

What the attack on Saudi oil facilities could mean for Canada's oilpatch and Keystone XL © AFP/Getty Images This AFPTV screengrab from a video made Saturday shows smoke billowing from an Aramco oil facility in Abqaiq, about 60 kilometres southwest of Dhahran in Saudi Arabia's eastern province. The secure supply of Canadian oil to the United States could recapture the attention of American decision-makers following the recent attack on Saudi Arabian oil facilities, experts say.

Industry and government leaders around the world are still assessing the impact of Saturday's drone strikes on the state-owned Saudi Aramco facilities.

The attack disrupted about five per cent of global crude supplies, sending oil prices soaring.

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With Trump's support for Keystone XL , Canada ' s oilpatch now has government approvals in place for three new export pipelines, which raises the question whether it will ever need to construct Pipes for TransCanada's planned Keystone XL oil pipeline are stored in Gascoyne, N.D., in November 2014.

What does the attack on Saudi Arabia’ s infrastructure mean for oil market dynamics? The growth of tight oil has reduced US import dependence, emboldening US foreign policy since the 2016 election. More production is due on stream from the US, Canada , Brazil, Norway and Canada , among others.

The news also saw Canadian energy stocks surge by double digits during Monday's trading amid concerns the impact on oil markets could last months.

Canadian crude — overshadowed by soaring U.S. shale oil production in recent years — could receive greater focus with renewed discussion about secure energy supplies, said Rory Johnston,  a commodity economist at Scotiabank.

"Historically, we've seen more of the sentiment toward the Canadian oil sector as being couched in terms of oil security, which as a concept has kind of fallen by the wayside," Johnston said.

"This will likely raise that energy security narrative back to the forefront of public discussion, which all else equal, should benefit the Canadian oilpatch as a source of secure supply — politically secure and right next door to the United States."

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Saudi Stocks Tumble as Tensions Surge After Aramco Drone Attacks Saudi Arabian stocks sank after drone strikes highlighted the vulnerability of the kingdom’s oil facilities to terror attacks. The Tadawul All Share Index fell as much as 3.1%, led by Al Rajhi Bank and Saudi Basic Industries Corp.. The drop erased this year’s gain and lowered the gauge’s valuation to the weakest since March, before the kingdom’s stocks were included in MSCI Inc.’s emerging-market gauge. Equities in the United Arab Emirates, Qatar, Kuwait and Bahrain retreated at least 0.4%.

Oil prices, which have remained low for months, could spike when markets open Monday as Saudi Arabia scrambles to repair damage to its energy infrastructure inflicted this weekend.

The attack on the world' s largest oil processing plant early Saturday morning is a dramatic escalation in the confrontation between Iran and Saudi Arabia -- even if the Iranians didn't fire the drones or missiles responsible.

While Canadian pipeline constraints make it difficult for oil companies to get more Alberta oil to market currently, Johnston said, a shift in the conversation could fuel further political pressure to build projects like Keystone XL, which has struggled in the face of legal, environmental and political challenges in the U.S.

"It wouldn't necessarily accelerate the timeline of these types of projects being built," he said.

"I think what this does is just lessens the risk that we're going to see further delays."

Alberta 'the most secure major source of energy': Kenney

Aberta Premier Jason Kenney, who was in New York on Monday to meet with institutional investors, also emphasized the message that Alberta is "the most secure major source of energy" in the world.

"The strike on Saudi refineries should be a wake-up call," he posted to social media.

Kenney was also reported Monday to be looking at easing mandatory oil production cuts in Alberta following those attacks.

Expect to feel today's oil price spike at the gas pumps

Expect to feel today's oil price spike at the gas pumps Gasoline prices could rise one or two cents this week because of the spike in crude prices caused by an attackt on the world's biggest production plant, but analysts are expecting volatile crude prices in weeks to come, which makes longer-term price increases difficult to predict.

The attacks on the Abqaiq and Khurais oil facilities in Saudi Arabia have sent oil prices soaring. One possible scenario is that the attacks employed Tomahawk-like cruise missiles fired from Iran.

RBC Capital Markets' Helima Croft and CNBC' s Brian Sullivan and Eamon Javers discuss the impact the weekend attacks on major Saudi oil facilities could have

American interest in secure supplies of oil from Canada was particularly strong after the terror attacks on Sept. 11, 2001, said Christopher Sands, an expert on energy policy at Johns Hopkins University in Washington, D.C.

What the attack on Saudi oil facilities could mean for Canada's oilpatch and Keystone XL © CBC The Abqaiq oil processing facility targeted by the attack is some 330 kilometres northeast of the Saudi capital of Riyadh.

That changed during the Obama administration, he said, with greater emphasis on the environment.

Sands said the situation with Saudi Arabia may have Americans looking at Alberta, but it could underscore for some lawmakers how important it is Canada build on its own pipeline capacity and ensure security of its oil.

"You don't have enough capacity, and this makes us think you need redundant capacity because what if something goes wrong?" said Sands, adding that ensuring the security of existing energy infrastructure is key.

Tim McMillan, president of the Canadian Association of Petroleum Producers, said the current situation in Saudi Arabia may provide more incentive to expedite projects like Keystone XL and Enbridge's Line 3, which would carry more oil from Alberta to the U.S.

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But he added that even with President Donald Trump "pushing these projects, it has been a challenge with the U.S. court system and some of the other delay tactics that opponents are using."

Though McMillan said he's confident those projects will be built, he added he was "less confident" that the U.S. legal system will move any faster.

"But why on earth is Canada so beholden to the United States when we have the world's second-largest coastlines, where we have a close connection to the growing markets in Asia?" he added.

What the attack on Saudi oil facilities could mean for Canada's oilpatch and Keystone XL © Hamad I Mohammed/Reuters Smoke is seen following a fire at Aramco facility in the eastern city of Abqaiq, Saudi Arabia, on Saturday. Since the facility was attacked, global oil prices have surged.

While Canadian producers still face challenges in getting oil to market, whether by pipeline or by rail, Ian Nieboer, managing director at RS Energy Group, said they should benefit from higher oil prices.

The question everyone is trying to answer, he said, is how long will the situation last.

"The outage itself and its duration is probably the first and most pronounced fundamental impact," he said.

"The longer term and more structural piece is, is there some sort of risk premium [on oil prices] that maybe enters the market as you think about the politics of the Middle East and now really the circumstances that led to this weekend's attack," Nieboer said.

As for gasoline prices, Roger McKnight, chief petroleum analyst at En-Pro International, says it likely means higher gasoline prices in Canada as early as Wednesday. He said it's unclear how long it's going to last.

We have no idea … where this thing is going to go because it's completely out of anyone's control. - Roger McKnight, chief petroleum analyst at En-Pro International

"We have no idea … where this thing is going to go because it's completely out of anyone's control," McKnight said.

"And the Saudis are going to keep things kind of close to the vest because they don't want to really upset the market completely. But the facts are facts. Five per cent of crude supply goes off the market, and prices have to go up."

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