MEOG: Price rally sees improved sentiment

The ongoing oil price rebound has seen sentiment throughout the Middle East improve ahead of the upcoming OPEC+ meeting, which is rumoured to see a change of tack from Saudi Arabia as the Kingdom considers reversing its decision to cut output.

Such a decision was made by Iraq this week when the Ministry of Oil announced it had frozen the planned prepayment crude supply deal between the state oil marketer SOMO and China’s Zhenhua. The contract, which was awarded in December, was due to see Zhenhua pay $2bn up front for a portion of its guaranteed five-year crude supply. However, citing changing market conditions, Iraq has put the deal on ice, adding that it is unlikely to consider similar deals in the near future.

In the Eastern Mediterranean, an agreement was announced between Israel and Egypt for the construction of a new gas pipeline connecting the offshore Leviathan to the African country’s Damietta and Idku liquefaction plants. The move will allow the partners developing the field to increase exports while gaining the opportunity to target global markets with LNG.

Meanwhile, Iran announced progress on its highly anticipated Jask Oil Terminal, which will eventually become the Islamic Republic’s key oil export hub, allowing for crude and products to be shipped overseas from outside the Strait of Hormuz. A single-point mooring (SPM) is now expected to be in place by the end of March alongside the first phase of a major new pipeline, enabling the transportation of more than 700,000 barrels per day (bpd) of crude to be moved from oilfields in the prolific West Karoun oil region 1,000 km to Jask for export.

Iran has also begun talks with Turkey’s Botas regarding the renewal of their 30-year natural gas contract, which expires in 2026. Nearly 16bn cubic metres per year of Turkey’s long-term gas contracts expire this year and Ankara is hoping to take advantage of increased availability to knock prices down. However, with oil-indexed prices tending to lag by between six and nine months, the race will be on to secure deals before the current rebound is factored in.