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Global Intelligence Report - 9th November 2018

Saudi Arabia

Sources

• Sources close the royal court in Saudi Arabia
• High-level Egyptian energy industry sources
• Former Egyptian intelligence source
• Diplomatic sources in UAE

SANCTIONS & SAUDI

OPEC and Russia are set to discuss oil production cuts again, less than a month after both Alexander Novak and Khalid al-Falih assured markets they will ramp up production to offset any supply losses after U.S. sanctions against Iran came into effect.

Conflicting signals demonstrate a new level of uncertainty in global oil. After dozens of media reports claimed that Iranian oil exports had been falling sharply and steadily, data now suggests the fall has been less steep—a fact immediately weighing on oil prices.

In this context, just months after some fund managers and analysts warned Brent could hit $100 or higher by the end of the year, it now seems a decline back to $70 a barrel is far more likely.

The imposition of sanctions against Iran and those who do business with Iran has had a very limited impact on oil prices, due in large part to strong output from the U.S. and Russia. Sources close to the Saudi royal court say Mohammed bin Salman is also ramping up capacity, although geopolitical tensions over the death of Khashoggi may end up impacting Saudi Arabia’s cooperation with the U.S. on that front. So far, the tensions between the US and Saudi Arabia over the incident haven't had any ramifications in the oil market, but it's on the minds of many market participants as the OPEC+ group meets this week in Abu Dhabi.

EGYPT OIL DEBTS

Oil exploration in Egypt has been hampered for a decade by the country's sluggishness in repaying debts to foreign firms (with total debt rising as high as $6bn). The situation was especially stark in the post-revolutionary period from 2011 to 2013, but a major push in the last two years has seen the oil ministry pay more than $2 billion of those debts. Now, it still owes about $1.2 billion but has an aggressive plan to pay it off next year.

The plan was driven in large part by oil executives with the ear of Gen. Al Sisi, including Hisham Mekkawi, who heads BP Egypt, and Khaled Abu Bakr, chairman of Taqa Arabia, according to two sources in the oil industry in Egypt.

The hope on a macroeconomic level is that Egypt can cut back its expensive imports of petroleum products to generate power by encouraging more natural gas exploration --…




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