Saudi Arabia has begun to replenish its crude inventories as production returns to normal levels following the September 14 attacks.

With fears over supply losses mostly gone, oil prices have fallen as attention returns to the global economy and concerns over weak demand.

Is this the correct response? Are fundamentals as bad as prices suggest?

Can Saudi Aramco make good on its promise to fully restore production by September 30?

That deadline is approaching fast and comes just 16 days after the attack on the Abqaiq processing facility and Khurais oil field damaged major pieces of infrastructure.

 But the oil market remains skeptical Aramco can quickly fix the damage.

It was arguably the most significant event in the oil market since Iraq’s invasion of Kuwait before the 1991 Gulf War.

The September 14th attack against Saudi Arabia’s oil infrastructure damaged the world’s largest oil processing facility and the country’s second-largest oil field.

The disruption to supply -- equal to 5% of global output -- sent oil futures soaring 14% higher on Monday when electronic trading resumed after the attack two days earlier.

A team from Ursa traveled this week to Singapore to attend the Asia Pacific Petroleum Conference (APPEC), one of the major events on the oil industry calendar.

There was no shortage of topics to talk about.

This year’s event took place against the backdrop of the US-China trade war, worries over the health of the global economy, the firing of the Saudi oil minister, US sanctions against Venezuela & Iran, IMO 2020, to name a few.

As Hurricane Dorian struck the Bahamas, the slow-moving storm caused severe devastation due to high winds and flooding.

People were desperate for updates, but unfortunately, getting news was very difficult.

Some of the best information about the hurricane came from satellite imagery, specifically synthetic aperture radar (SAR).

Venezuela’s crude oil inventories increased significantly in August as tougher US sanctions make it more difficult for state-owned PDVSA to sell oil overseas.

With fewer customers willing to buy Venezuelan crude, the amount of oil in storage at the main export terminal, El Jose, soared by almost a third over the three weeks ending August 22, according to Ursa measurements.

This build-up at El Jose has lifted crude inventories nationwide.

An inverted US Treasury bond yield curve. China’s industrial growth at a 17-year low. Negative German GDP growth.

These headlines have roused fears the global economy is slipping into recession.

In early December 2018, the Alberta provincial government took a dramatic step to address the oversupply of oil that was causing the collapse in Canadian crude prices.

Local oil companies were told how much they could produce, starting January 1, making Calgary feel more like an OPEC capital than a freewheeling oil town.

Eight months later, those efforts are bearing fruit.

A decline in US crude inventories has narrowed the price discount of the US crude benchmark (WTI) versus the global crude benchmark (Brent) to its lowest level in more than a year.

Increasing volumes of US crude leaving from Gulf Coast ports to refineries abroad have drained inventories in Texas and Louisiana, and pulled barrels via pipeline from the Cushing, Oklahoma storage hub.

This trend should continue.

The talk in the oil market the last few months has centered on two main stories: concerns over global economic growth and conflict in the Strait of Hormuz.

The first story suggests less oil demand (bearish), while the second story implies less oil supply (bullish). Taken together, this narrative has kept oil prices in a tight range.

In early July, Saudi Arabia’s energy minister Khalid al-Falih said that output cuts by OPEC and other major producers needed to be kept in place to lower crude inventories.

That wasn’t the first time al-Falih has mentioned crude inventories as the preferred metric for determining OPEC production policy.

What surprised many people was the time period he selected.

Record-high US crude oil exports last month caused a sharp drawdown in crude storage at the only port capable of loading and off-loading supertankers.

Crude inventories at the Louisiana Offshore Oil Port (LOOP) plummeted in June, falling from 83% of capacity the week of May 30 to 36% of capacity the week of July 11, according to Ursa measurements.

The demand for barrels outpaced the supply arriving at the complex, pulling barrels out of storage.