Saudi-Iran Rapprochement, Iraq’s Crude Flows, and Europe’s Gas Supplies

In Today’s Issue:

• Impact of Saudi-Iran Rapprochement on Global Energy Markets

• Iraq’s Changing Crude Flows Amid Europe’s Ban on Russian Oil, and Baghdad-Erbil Dispute (3 charts)

• The Dutch TTF Rebound following Concerns over France’s LNG Import Disruptions (4 charts)

  MAIN TAKEAWAYS

1. In our view, the Saudi-Iran latest agreement to resume ties is only on paper until we see results on the ground, starting with face-to-face meetings between heads of state.

2. The probability of attacks on oil facilities, oil tankers, and other critical energy targets in the Gulf is now higher than it was before the China-brokered deal.  Many factions, even within the Iranian regime, may seek to obstruct the agreement’s objectives. 

3. We view the UN chartering a vessel to transfer oil from SAFER, the decaying Floating Storage and Offloading (FSO) tanker moored off Yemen, as part of the Saudi-Iran agreement. If the oil transfer is successfully completed, then this could be the deal’s first positive outcome.  

4. Iraq’s Basrah crude exports to Europe are expected to remain elevated.  The Suez Canal Authority and shipping companies have been benefitting from the change in oil movement from Asia to Europe.

5. The Netherlands is among the European countries that have significantly increased their imports of Basrah crude.

6. As the Iraqi Kurdistan region’s KBT crude exports, via Ceyhan, dropped to some European countries, they sharply rose to Israel last month.

7. The shutdown of French LNG terminals has caused jitters in the gas market as this is likely to impact European LNG supplies. Nevertheless, natural gas prices in Europe are expected to increase.

Impact of Saudi-Iran Rapprochement: Main Points