After hours of wild speculation about how fast Saudi Arabian oil infrastructure could come back, a definitive statement by the Saudi oil minister seemed to end the debate. Or did it?

Reports of overly optimistic unnamed Saudi sources seemed to be offset by a lot of skepticism about how quickly Saudi Arabia and Aramco could get things back to normal. The attack, the U.S. and Saudi Arabia strongly suggest, came from Iran on Saudi Arabia's Abqaiq oil processing plant and its Khurais oil field. It shut down over 5% of the world's daily supply and shook markets that were panicked about how long the world would lose that supply.

Crude oil broke hard after rumored reports from an unnamed high level Saudi Arabian source that said the outlook is for a quick recovery. Comments came that said the impact on Saudi Arabian exports was minimal thanks to Saudi oil in storage. The source said that Saudi Arabia was close to restoring 70% of its production and most importantly the source wanted to stress that Saudi Aramco’s fast recovery from the crisis highlights the “real value" of the company Saudi Aramco. The Financial Times even put out a story that raised doubts about the claims of that unnamed source. Yet later, Prince Abdulaziz bin Salman, Saudi Arabia’s energy minister, seemed to paint a very optimistic timeline for recovery. He said that the kingdom had restored half of the lost production already and would fully restore output by the end of September. He added that full production capacity of 12 million barrels of oil a day would not be available until the end of November. YetSaudi Arabia is not saying that they can meet customer demand from production but storage.

Yet even after the press conference and a big sell-off in crude oil, many members of the oil industry seemed to question that rosy outlook, while keeping in mind the fast recovery of production shows the “real value” of Saudi Aramco. Many industry insiders have said that even if they can restore oil production, the question of whether they have the ability to process the type of oil that their customers want. Reports of tanker confusion in Saudi ports as ships awaited to be loaded seemed to add to concerns. While customers are being promised their whole allotment of crude mainly from storage, can they be assured of the type of crude grades that they desire? Industry insiders doubt the Saudis can fix their oil processing plant that quickly because it may take months to get the parts that will be needed to fix the damage. Besides, Saudi Arabia is not saying that theory can meet customer demand from production but storage instead.

Reports are suggesting that Saudi’s biggest customers are not waiting to find out. India reportedly is looking to Russia to replace lost Saudi supply. There was also a report that China booked three empty oil tankers to head to the U.S. to get filled up with good old American light crude. So as you look forward to the next few weeks that should increase the odds of big crude draws from U.S. oil storage.

And while the market is feeling a little better about the return of Saudi supply by whatever that means, the bigger questions about the attack has yet to be answered. How can they stop an attack from happening again and what happens next? The Wall Street Journal reports that “U.S. and Saudi military forces and their elaborate air-defense systems failed to detect the launch of airstrikes aimed at Saudi Arabian oil facilities, allowing dozens of drones and missiles to hit their targets, U.S. officials said. Saudi and U.S. focus had been largely on the kingdom’s southern border with Yemen, where Riyadh has been fighting Iranian-backed Houthi rebels in Yemen’s civil war, the officials said. The attacks, however, originated from Iranian territory in the northern Persian Gulf, people familiar with the investigation into the strikes said.”  The Journal went on to say, “ As Saudi officials review information coming in from the U.S., Kuwait and their own investigators, they are increasingly confident that drones and missiles launched near Iran’s southern border with Iraq flew low to the ground on their way to slamming into the heart of the Saudi oil industry early Saturday. Investigators have found debris that appears to be Iranian cruise-missile technology, the people familiar with the investigation said.“Everything points to them,” a Saudi official said, referring to Iran. “The debris, the intel and the points of impact.”

The oil market is waiting to see the U.S. and the Saudi response. Fox News reports that “The Trump administration was moving cautiously as it navigated competing impulses — seeking to keep up a pressure campaign aimed at forcing Tehran to negotiate on broader issues with the U.S. while deterring any further Iranian attacks and avoiding another Middle East war. It all was occurring as the administration deals with a host of other foreign policy issues and has no national security adviser, following the recent ouster of John Bolton. Echoing Trump's warning from earlier in the week, Vice President Mike Pence said American forces were "locked and loaded" for war if needed. But he also noted that Trump said he doesn't want war with Iran or anyone else. "As the president said yesterday, it's 'certainly looking like' Iran was behind these attacks," Pence said. "And our intelligence community at this very hour is working diligently to review the evidence.”

NBC News reports that in a national security meeting on Monday, U.S. military leaders provided President Donald Trump with a menu of possible actions against Iran. But the president, seeking a narrowly focused response that wouldn't draw the U.S. into broader military conflict with Iran, asked for more options, people briefed on the meeting said. That could entail a strike by Saudi Arabia, whose oil facilities were hit Sunday in an unprecedented attack, that the U.S. would support with intelligence, targeting information and surveillance capabilities but without the U.S. actually firing any weapons at Iran, one person familiar with the planning said.

In the wake of Sunday's attack, U.S. military planners have revisited a long-identified list of potential Iranian targets that could constitute a proportional response. Those include a strike on Iran's Abadan oil refinery, one of the world's largest, or Kharg Island, Iran's biggest oil export facility. Attacks on either location would significantly impede Iran's ability to process and sell oil, which the Trump administration has already been working to restrict after pulling out of the Iran nuclear deal. An attack on Iran’s refinery or its export facility would cause another oil spike reminiscent of what we saw on Sunday night. Also, there are reports that Venezuela’s PDVSA has started shutting and slowing oil production at some eastern and western oilfields as inventories mount due to lack of buyers and fewer vessel operators willing to load in to avoid problems.

Whatever happens, the one thing we do know is that the speculation that there would be a lifting of sanctions on Iran is probably forgotten. And a bearish weekly American Petroleum Institute (API) report is easing concerns about the recent sharp drops in U.S. crude oil supply. The API reported a surprise 592,000-barrel increase in crude supply. That was unexpected as was the 1.599 million barrel increase in crude oil supply and the even larger 1.998-million-barrel increase in gasoline supply. Oil will not only be looking to news wires for the next shoe to drop in the Saudi attack but also the Fed and interest rates and the Energy Information Administration report. Regardless, we feel the crude oil market should have a limited downside because of the sharply increased geopolitical risk and the fact that the market was betting on the return of Iranian supply.

Yesterday’s Fed repo action is raising fears of liquidity tightness and that drama almost assures us of a rate cut today.

Natural gas is getting a short squeeze. Andy Weisman writes that the "October natural gas contract has continued to rise amid bullish weather forecast shifts and continued short-covering. Strong LNG export demand may prolong the current upswing and limit any near-term downturn in prices.” Still, renewed supply growth and weak autumn weather-driven demand—likely 135 gHDDs below October/November 2018—may lead shorts to establish new positions and yield more protracted declines in the 30-45 day window. The recent surge in natural gas prices has both boosted end-of-season storage projections and reduced anticipated coal displacement this winter—slashing risks of a winter storage squeeze in all but the coldest scenarios.”