GULF WEEKLY: Covid wave eases, JCPOA negotiations progress and Saudi-Iran talks take place
A skimmable summary overlaid with our analysis and links. Headlines:
* US-Iran talks seem to be making good progress after the US clarified sanctions it could lift.
* Secret Saudi-Iran talks were mediated by Iraq, focusing on Yemen and Lebanon.
* The latest coronavirus wave in the region may have peaked.
* Saudi GREs are borrowing, including plans for Aramco supply chain financing and a $3.7bn loan for the Red Sea tourism project.
* The privatization of the Saudi Grains Organisation was belatedly completed, with more asset sales planned.
* The US House approved the Protection of Saudi Dissidents Act, aiming to further restrict arms sales.
* The UAE extended some stimulus measures, including a liquidity facility until mid-2022.
* Kuwait’s partly state-owned Equate Petrochemical sold $700m in 7yr bonds.
* Oman auctioned an OR300bn ($780m) local bond at 5.15% on a weak order book.
* Oman-UAE relations warmed as both countries pardoned jailed nationals from the other state.
Cross-cutting themes
Iran
In an important step forward, the US provided clarification on sanctions it is willing to lift in a coordinated return to JCPOA compliance. These include sanctions on the central bank, oil companies and metal producers that the Trump Administration had framed as anti-terrorism in an effort to prevent a rollback. However, US officials in Vienna said that serious differences persist, and several rounds of talks are likely required (Rt). Other JCPOA members, including Russia, indicated positive movement (Rt). Iran’s chief negotiator said the talks were on the right track and rebuffed an Iranian media report saying that the US was only offering temporary sanctions waiver that could be quickly snapped back (Rt). President Rouhani was even more upbeat, saying the negotiations were 60%-70% complete (IR). Some Iranian officials have indicated that there may be an interim deal that sees some enrichment rollbacks in return for unblocking funds. While this is possible given the political time constraints, postponing sanctions-lifting until a new Iranian president is in office, we continue to think that a fuller compliance-for-compliance return to the JCPOA is more likely and is not yet priced in by the oil market.
Coronavirus
The latest infection wave may have peaked. Bahrain, Kuwait, Qatar and Oman all saw slight decreases after 4-6 weeks of increases. UAE cases remained flat as Saudi Arabia increased slightly, although it remains the lowest in the region on a per capita basis and only slightly more than Qatar in absolute numbers. Oman remains the most concerning given both high caseloads and a very slow vaccine rollout (covering just 2% of the population so far).
Oil
OECD oil inventories were only 57m barrels above their 2015-19 average as of February, barely a fifth of their peak excess level in July 2020 (BB).
Libyan production, which rebounded strongly last year as a result of the peace process, has fallen by a quarter to about 1m b/d in recent days after the National Oil Company halted exports from the Hariga terminal over a budget dispute with the central bank (Rt).
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