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Iranian oil is quietly flooding into the global market again


Iran is shipping the most crude in almost five years, fortifying its re-emergence on the geopolitical stage while posing risks for a fragile global crude market.

Exports have surged to the highest level since US sanctions were re-imposed in 2018, according to a range of analysts including Kpler Ltd., SVB Energy International, FGE and the International Energy Agency. The vast majority is flowing to China, as the world’s biggest importer scoops up cut-price barrels from the Islamic Republic.

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Rebounding sales are the most tangible sign yet that the country — while still reeling financially from years of isolation — is reasserting itself, having started to repair ties with regional rivals, fostered relations with Asia’s leading power, and even begun a tentative diplomatic engagement with Washington.

Yet the extra supplies are sapping confidence in an oil market weakened by faltering economic growth and cheap Russian cargoes, frustrating efforts by Iran’s partners in the OPEC+ alliance to put a floor under crude prices.

“Iran’s crude exports smashed it last month,” said Homayoun Falakshahi, a senior analyst at Kpler. “Iranian crude is extremely interesting for those willing to take the risk to buy.”

Crude shipments have doubled since last autumn to reach 1.6 million barrels a day in May, even as American sanctions remain in place, according to the firm. Production has hit 2.9 million barrels a day, the highest since late 2018, the Paris-based IEA estimates. Consultants SVB Energy, Petro-Logistics SA and FGE believe that output is even higher, maybe surpassing 3 million barrels a day.

The recovery in flows — severely curtailed after former President Donald Trump quit a nuclear accord with Tehran in 2018 — could bolster an economy battered by rampant inflation, a plunging currency, and periodic unrest against hardline President Ebrahim Raisi.

It coincides with other signs of Iran’s revival: a preliminary accord with regional adversary Saudi Arabia in April, efforts to rehabilitate Syrian ally Bashar al-Assad, and clandestine talks to lower tensions with the White House.

Through negotiations between intermediaries in Oman and on the sidelines of United Nations meetings, Washington and Tehran are inching toward an understanding to free American prisoners and explore limits on Iranian nuclear research, in exchange — according to a person familiar with the Iranian position — for leeway to ship more crude.

A State Department official said rumors of a nuclear deal are “false and misleading” and the US priority remains to stop Iran from obtaining a nuclear weapon. Iran says its atomic program is for peaceful purposes only.

Yet additional shipments — adding to flows from two other OPEC+ members under sanctions, Russia and Venezuela — are already happening, hitting global oil markets. Prices have retreated 12 percent this year to near $75 a barrel in London, spurring a flurry of downgrades by forecasters like Goldman Sachs Group Inc. and JPMorgan Chase & Co.

Iran’s surge has undermined efforts to stabilize the market by the Organization of Petroleum Exporting Countries and its leader, Saudi Arabia, which this month announced a new production cutback of 1 million barrels a day, to little effect.

Ever since US sanctions were reimposed five years ago, Iranian crude has been shipped to its few remaining buyers on a so-called “dark fleet of tankers” — often aging and uninsured — that de-activate transponders to avoid detection.

While tanker-tracking shows that China has remained Tehran’s main customer, official data registers no imports from the Islamic Republic in the past year. Instead, purchases have soared from Malaysia, where Iranian cargoes are often sent for transfer to another ship, blurring the consignment’s origins.

“These ghost barrels are not counted in the official total,” said SVB founder and president, Sara Vakhshouri. But “while the whole of OPEC+ is trying to cut as much as possible, and Saudi goes with a voluntary cut, every barrel counts.”

Chinese refiners — especially smaller, independent companies in Shandong province — are ramping up purchases of Iranian cargoes as the price discounts offered by Tehran help offset a recent slump in profit margins, Kpler says.

Iran has had to deepen discounts to its crude to compete with an influx of Russian crude pushed out of Europe by sanctions, according to Iman Nasseri, managing director at FGE in Dubai. The increased flow is drawing heavily from crude it had stockpiled on tankers to satisfy the demand, the companies say.

“China’s willingness to support Iran by taking its sanctioned oil, suggests a slight improvement in Iran-China relations,” said Greg Brew, an analyst at consultants Eurasia Group. “All of this supports the view that Iran’s position is improving, along with its advancing normalization with other regional states.”

It was Beijing that brokered the fledgling detente between Iran and Saudi Arabia — a symbol of the growing closeness both countries seek with Asia’s rising power — as the Middle East rivals seeking to defuse decades of proxy conflicts, such as the ongoing war in Yemen.

Besides the increased appetite from China, some analysts have speculated that the surge has been tacitly permitted by a US government intent on keeping gasoline prices in check. Turning a blind eye could also help as the two countries work on a building a diplomatic channel.

“There’s been less enforcement of the sanctions by a US administration wanting to counter Russian crude in the market while also keeping supply flowing,” said FGE’s Nasseri.

The impact on oil prices from Tehran’s comeback could be limited going forward. Crude deliveries to China may slow while authorities conduct a crack-down on bitumen mixture, which traders suspect is used as a cover for denser and cheaper barrels sold by Iran.

In any case, global oil markets are set to swing into a sharp deficit for the rest of the year as China’s post-pandemic rebound gathers pace, the IEA predicts. Demand will exceed supply by roughly 2 million barrels a day in the second half of the year, more than enough to absorb additional Iranian flows.

Crude traders remain skeptical of the projected supply tightness, in part as the swelling tide of barrels from Iran casts a shadow on the outlook.

“Negative supply side anxiety is palpably shaping the mood,” said Tamas Varga, an analyst at broker PVM Oil Associates Ltd. in London, adding that extra Iranian flows are part of that.

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US, Iran in talks to cool tensions with a mutual ‘understanding’

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Abu Dhabi Overtakes Oslo for Sovereign Wealth Fund Capital in Global SWF’s First City Ranking

Today, industry specialist Global SWF published a special report announcing a new global ranking of cities according to the capital managed by their Sovereign Wealth Funds (SWFs). The findings show that Abu Dhabi is the leading city that manages the most SWF capital globally, thanks to the US$ 1.7 trillion in assets managed by its various SWFs headquartered in the capital of the UAE. These include the Abu Dhabi Investment Authority (ADIA), Mubadala Investment Company (MIC), Abu Dhabi Developmental
Holding Company (ADQ), and the Emirates Investment Authority (EIA). Abu Dhabi now ranks slightly above Oslo, home to the world’s largest SWF, the Government Pension Fund (GPF), which manages over US$ 1.6 trillion in assets. Abu Dhabi and Oslo are followed by Beijing (headquarters of the China Investment Corporation), Singapore (with GIC Private and Temasek Holdings), Riyadh (home to the
Public Investment Fund), and Hong Kong (where China’s second SWF, SAFE
Investment Corporation, operates from). Together, these six cities represent two thirds
of the capital managed by SWFs globally, i.e., US$ 12.5 trillion as of October 1, 2024.
For the past few decades, Abu Dhabi has grown an impressive portfolio of institutional
investors, which are among the world’s largest and most active dealmakers. In addition
to its SWFs, the emirate is home to several other asset owners, including central banks,
pension funds, and family offices linked to member of the Royal Family. Altogether, Abu
Dhabi’s public capital is estimated at US$ 2.3 trillion and is projected to reach US$ 3.4
trillion by 2030, according to Global SWF estimates.
Abu Dhabi, often referred to as the “Capital of Capital,” also leads when it comes to
human capital i.e., the number of personnel employed by SWFs of that jurisdiction, with
3,107 staff working for funds based in the city.
Diego López, Founder and Managing Director of Global SWF, said: “The world ranking
confirms the concentration of Sovereign Wealth Funds in a select number of cities,
underscoring the significance of these financial hubs on the global stage. This report
offers valuable insights into the landscape of SWF-managed capital and shows how it is
shifting and expanding in certain cities in the world.”

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AM Best Briefing in Dubai to Explore State of MENA Insurance Markets; Panel to Feature CEOs From Leading UAE Insurance Companies

AM Best will host a briefing focused on the insurance markets of the Middle East and North Africa (MENA) on 20 November 2024, at Kempinski Central Avenue in Dubai.
At this annual regional market event, senior AM Best analysts and leading executives
from the (re)insurance industry will discuss recent developments in the MENA region’s
markets and anticipate their implications in the short-to-medium term. Included in the
programme will be a panel of chief executive officers at key insurance companies in the
United Arab Emirates: Abdellatif Abuqurah of Dubai Insurance; Jason Light of Emirates
Insurance; Charalampos Mylonas (Haris) of Abu Dhabi National Insurance Company
(ADNIC); and Dr. Ali Abdul Zahra of National General Insurance (NGI).
Shivash Bhagaloo, managing partner of Lux Actuaries & Consultants, will his present
his observations in an additional session regarding implementation of IFRS 17 in the
region. The event also will highlight the state of the global and MENA region
reinsurance sectors, as well as a talk on insurance ramifications stemming from the
major United Arab Emirates floods of April 2024. The programme will be followed by a
networking lunch.
Registration for the market briefing, which will take place in the Diamond Ballroom at the
Kempinski hotel, begins at 9:00 a.m. GST with introductory comments at 9:30 a.m.
Please visit www.ambest.com/conference/IMBMENA2024 for more information or to
register.
AM Best is a global credit rating agency, news publisher and data analytics
provider specialising in the insurance industry. Headquartered in the United
States, the company does business in over 100 countries with regional offices in
London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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Future of Automotive Mobility 2024: UAE Leads the Charge in Embracing Digital Car Purchases and Alternative Drivetrains

-UAE scores show highest percentage among the region in willingness to purchase a car
completely online
– Openness to fully autonomous cars has grown to 60% vs previous 32%.
– More than half of UAE respondents in the survey intend to move to hybrid cars during
next car purchase, while less than 15% intend to move to fully electric car.
– UAE sees strong use of new mobility services such as ride-hailing (Uber, Careem, Hala
Taxi)
– The perceived future importance of having a car is not only increasing in UAE but is
higher than any other major region globally, even China

Arthur D. Little (ADL) has released the fourth edition of its influential Future of Automotive Mobility (FOAM) report, presenting a detailed analysis of current and future trends in the automotive industry. This year’s study, with insights from over 16,000 respondents across 25 countries, includes a comprehensive focus on the United Arab Emirates (UAE). The report examines car ownership, electric vehicles,
autonomous driving, and new mobility services within the UAE.

“The UAE is at the forefront of automotive innovation and consumer readiness for new mobility
solutions,” said Alan Martinovich, Partner and Head of Automotive Practice in the Middle East
and India at Arthur D. Little. “Our findings highlight the UAE’s significant interest in
transitioning to electric vehicles, favorable attitudes towards autonomous driving technologies,
and a strong inclination towards digital transactions in car purchases. These insights are critical
for automotive manufacturers and policymakers navigating the evolving landscape of the UAE
automotive market.”
Key Findings for the UAE:
1. Car Ownership:
o Over half of UAE respondents perceive that the importance of owning a car is
increasing, with the study showing the increase higher than any other major
region, including China.
o Approximately 80% of UAE respondents expressed interest in buying new (as
opposed to used) cars, above Europe and the USA which have mature used
vehicle markets

2. Shift to Electric and Hybrid Vehicles:
o While a high number of UAE respondents currently own internal combustion
engine (ICE) vehicles, more than half intend that their next vehicle have an
alternative powertrain, with significant interest in electric and plug-in hybrid
(PHEV) options. Less than 15% plan to opt for pure battery electric vehicles
(BEVs).

3. Emerging Mobility Trends:

o Ride-hailing services are the most popular new mobility option among UAE
residents, with higher usage rates than traditional car sharing and ride sharing.
The study indicates a strong openness to switching to alternative transport modes
given the quality and service levels available today.

4. Autonomous Vehicles:
o UAE consumers are among the most open globally to adopting autonomous
vehicles, with a significant increase in favorable attitudes from 32% in previous
years to 60% this year versus approximately 30% in mature markets. Safety
concerns, both human and machine-related, remain the primary obstacles to
broader adoption.

5. Car Purchasing Behavior and Sustainability:
o The internet has become a dominant channel for UAE residents throughout the car
buying process, from finding the right vehicle to arranging test drives and closing
deals. UAE car buyers visit dealerships an average of 3.9 times before making a
purchase, higher than any other region in the world, emphasizing the need for
efficient integration of online and offline experiences.
o Upwards of 53% of respondents from the region would prefer to ‘close the deal’
and complete the purchase of their car online, which is the highest for any region
in the world.
o Sustainability is a key factor cited by UAE consumers as influencing car choice.
The UAE scored among the top half of regions, highlighting the importance of
environmental considerations.

“Our study confirms the promising market opportunities for car manufacturers (OEMs) and
distributors in the UAE” commented Philipp Seidel, Principal at Arthur D. Little and co-Author
of the Global Study. “Consumers in the Emirates show a great and increasing appetite for cars
while being among the most demanding globally when it comes to latest vehicle technologies
and a seamless purchase and service experience.”
The comprehensive report, “The Future of Automotive Mobility 2024” by Richard Parkin and
Philipp Seidel, delves into global automotive trends and their impact on various regions,
including the UAE. This study is an invaluable tool for industry stakeholders seeking to navigate
and leverage the dynamic changes driving the future of mobility.

 

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