For a facility described as the “very heart of the global oil industry,” the market response to the attacks on Saudi Arabia’s Abqaiq oil processing plant and Khurais oil field has been muted. Brent crude jumped by 20%, or almost $12 per barrel, to $71.95, the largest one-day gain since it began trading in 1988. But it fell back during the day to around $69, and to around $64.50 on Tuesday following Saudi reassurances, which seems moderate by comparison to the levels over $110/bbl during Libya’s revolution just eight years ago.

The gain in futures prices since the attacks is less but amounts to about $2/bbl out to the end of 2022, and $1 thereafter, suggesting anticipation of continuing geopolitical risk. Still, a $1 premium is a far cry from 2008 when, in less threatening circumstances but a much tighter market, it was regularly reckoned that prices contained a $10 “fear premium.”

Yet the missile or drone strikes on Abqaiq and the nearby giant Khurais field have cut 5.7 million barrels per day of crude oil output, more than half Saudi Arabia’s current production of 10.5 mb/d. In addition, 2 billion cubic feet per day of natural gas, and 700,000 b/d of natural gas liquids, have been disrupted, along with the resulting petrochemical products. Abqaiq, with capacity of 7 mb/d, receives crude oil from the Abqaiq field itself, Ghawar (the world’s largest conventional oil field), Khurais, Qatif, and Shaybah.

This represents the largest sudden loss of production in history, bigger than the 1973 embargo, the 1978-79 Iranian Revolution and outbreak of the Iran-Iraq War, Saddam Hussein’s 1990 seizure of Kuwait, the 2002-03 Venezuelan general strike, or the 2003 U.S. invasion of Iraq (albeit these were in smaller world markets). It comes at a moment when global markets are well-supplied, in spite of  U.S. sanctions on Iran, which have cut some 1.6 mb/d or more of exports, and Venezuela’s economic collapse, costing about 1.3 mb/d since the start of 2017.

So why is the market response not more panicked? Partly because Saudi Aramco’s guidance is that much of this lost production will be quickly restored. Energy Minister Prince Abdulaziz bin Salman told a press conference in Jeddah September 17 that 2 mb/d of Abqaiq’s capacity was already back online, repairs would be complete by the end of September, October production would be 9.8 mb/d, and Aramco’s full capacity of 12 mb/d would be restored by November. This recovery would be surprisingly quick given the extent of the damage and the specialized nature of much of the equipment, but could reflect a combination of existing redundancy, spares on site, emergency workarounds, and preparedness.

In the meantime, unfortunately, much of the kingdom’s spare capacity also runs through Abqaiq, but it can boost production from offshore fields, mostly heavy crude, by 250,000 b/d. Aramco’s legally required maximum sustainable capacity is 12 mb/d, of which 150,000 b/d is Bahrain’s share of the Abu Safa field. This capacity has to be available within three months, and therefore not all of it is necessarily in play yet.

Abqaiq processes mainly Arab Light and Super-Light grades, and this could present challenges for buyers now being offered heavier replacements. Refineries would have been hoping to produce more middle distillates to meet shipping demand ahead of the 2020 changeover to low-sulphur bunker fuels, and the loss of medium grades of Saudi crude now, as tanks would be filled in anticipation, is not helpful.

Saudi Arabia might also accelerate attempts to bring back the 500,000 b/d capacity Neutral Zone shared with Kuwait, closed since 2014 by a dispute. That had been a priority for Prince Abdulaziz even before the September 14 attacks.

For this month, Aramco will meet customers’ needs from its reported 187.9 million barrels of stored crude, an estimated 73 million barrels of which is in the kingdom, and other amounts at locations including Egypt, Rotterdam, and Okinawa, totaling some 26 million barrels. However, a significant share of these inventories are likely to be oil in pipelines and tankers that is in transit to buyers and not truly storage.

A simple illustration takes Aramco’s figures for the partial restoration of Abqaiq and Khurais by September 17 and full restoration by the end of September, adds additional output from the offshore, but excludes a possible restart of the Neutral Zone and boosts from any other fields or redundant facilities. Lost output over September (assuming production would have been at 10.5 mb/d in the absence of the attacks) would be 36 million barrels, or an average of 2.25 mb/d, draining one-third of the company’s readily available inventories. After full recovery, two months pumping at elevated levels of 11 mb/d would then return stocks to their starting point.

This calculation ignores the option of strategic stock releases. The International Energy Agency, set up for precisely this purpose in 1974, will consider approving a coordinated release of reserves by its members, who are all supposed to hold at least 90 days’ worth of net imports (European Union members are required to have 90 days of total consumption). This amounts to 1.55 billion barrels, of which the U.S. Strategic Petroleum Reserve holds 630 million barrels, some having been sold off recently to plug budget holes, and the president could approve a release. China, not a full IEA member, has at least another 287 million barrels of government stocks. So less than 2% of these emergency holdings would cover for a month’s outage in the illustration above.

Other countries can also increase output. The United States would be unlikely to reward Iran for an attack blamed on Tehran by allowing some of its sanctioned oil back to the market, but China might well step up purchases nonetheless. UAE oil production capacity has been advancing toward its 3.5 mb/d target, well above its 3.065 mb/d OPEC target and it with Kuwait, Iraq, and Russia could probably boost output by about 1 mb/d in total.

But Saudi officials have reportedly been telling OPEC colleagues they do not need to increase production, fearing that once out of the OPEC+ agreement, with OPEC and leading non-OPEC producers, it might be hard to corral them to comply again. On September 12, Prince Abdulaziz had just finished pressuring Iraq and Nigeria to improve their conformity with production cuts at a meeting in Abu Dhabi.

The sharp increase in prompt prices will incentivize drilling by U.S. shale producers, though the longer-dated gain of $1-2/bbl will not make much difference for hedging. U.S. production growth has been slipping in recent months, but somewhat higher prices, and perhaps some encouragement for long-suffering investors, could help. Certainly, if there is a major and long-standing disruption to Gulf exports, shale will revive.

This all assumes there are no more attacks, nor any further disruption in other volatile countries including Libya, Venezuela, and Nigeria. Depending on the degree of retaliation by the Saudis or the United States, further damage to oil facilities might not be limited to Saudi Arabia. The UAE has opened a low-key dialogue with Iran following its partial withdrawal from Yemen but remains closely aligned with Riyadh. In the event of a major conflagration, it would also be easy for Iran to disrupt Iraqi oil production and so worsen the market impact.

Overall, then, the relatively muted market response to a historically massive disruption reflects confidence in Saudi Arabia to restore most output quickly, others’ spare capacity, strategic stocks and, if the crisis is extended, the fast response of U.S. shale. It indicates the persistence of economic concerns, including over the trade war that has depressed prices this year.

And it suggests that, despite the likelihood of some retaliation, and the previous incidents of lower-level attacks on tankers and pipelines, there is not too much fear of a real conflagration or further serious strikes on oil facilities. That judgment may be borne out but seems premature: This confrontation is far from over, and Abqaiq is not the only petroleum vulnerability in the Gulf.