GULF WEEKLY: Saudi posts strong GDP, Jebel Ali stake sold, Coronavirus cases tick up

GULF COUNTRIES - Report 10 Jun 2022 by Justin Alexander

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A skimmable summary overlaid with our analysis and links. Headlines:

* Oil is close to its post-invasion high, and the UAE energy minister says it is nowhere near the peak.
* One driver is an IAEA resolution criticizing Iran, which responded by reducing nuclear site monitoring.
* Coronavirus cases rose back above 1,000/day in Bahrain, UAE and Saudi Arabia.
* Qatar’s PMI hit a new record of 67.5, Dubai’s reached a three-year high of 55.7 and Saudi’s held steady.
* Saudi Q1 growth of 9.9% was even stronger than the flash estimate, including 4.7% for non-oil.
* Biden’s Saudi visit is likely postponed until July and saw pushback from Congress and human rights groups.
* DP World sold a 22% stake in Jebel Ali to Canada’s CDPQ for $5bn, to help pay down debt.
* Dubai arrested the prominent Gupta brothers, implicated in a South African government corruption scandal.
* Qatar is expected to announce partners for its North Field expansion, adding Eni to the existing 4 operators.
* Spending in Oman was up sharply in April, by 5% y/y or 23% excluding oil expenditure outsourced to EDO.
* Bahrain’s current account surplus rose to a record 13% of GDP in Q1, boosted by both oil and aluminium.
* Jordan sold a $500m bond and unveiled a 10-year development strategy.
* Databank updates: Qatar/Oman fiscal, Saudi GDP, Bahrain Bop, PMIs, Saudi/UAE forecasts.

Cross-cutting themes
• Oil
o Oil keeps on rising, with Brent crude reaching $124, close to its peak in early March, as US oil inventory declined further with the summer driving season getting underway, and as the Chinese economy showed signs of recovering from Covid lockdowns and an Iran deal looks less likely.
o The UAE energy minister said prices are “nowhere near” their peak as Chinese demand is yet to rebound and the “brutal fact” that OPEC+ is about -2.6m b/d short of its target production despite all but 2-3 of its members being “maxed out”, basically leaving only Saudi Arabia and the UAE.
o Aramco hiked the July official selling price for Arab Light crude by more than expected to +$6.50 over the Dubai/Oman benchmark, up from +$2.10 in June. The increase was triple what the market had expected and indicates that Saudi Arabia expects the market to remain tight.
o In a reminder of the energy transition, the European Parliament voted in favor of a ban on the sale of gasoline vehicles by 2035.
• Iran
o As expected, the board of the IAEA, the UN nuclear watchdog, voted strongly in favor of a resolution criticizing Iran for failing to cooperate sufficiently with its investigation into uranium traces at undeclared sites (the vote was 30-2, including the US and European states, with only Russia and China opposing). The IAEA said that Iran’s response to its questions about the sites had not been “technically credible”. This issue had been pending for over a year, but western countries had previously held back at quarterly IAEA meetings to give space for JCPOA talks.
o In response, Iran angrily cut back on cooperation with the IAEA, removing 27 monitoring cameras at nuclear facilities, leaving about 40 remaining. The IAEA chief, Rafael Grossi, said the action could be a potentially “fatal blow” to JCPOA negotiations by making it impossible after about a month for the agency to accurately know what nuclear equipment and material Iran produces.
o The US said at the IAEA that Iran needs to “drop demand for sanctions lifting that clearly go beyond the JCPOA and are now preventing us from concluding a deal”.
o A draft bipartisan bill has been introduced in the US Congress to bolster air and missile defense systems in the Gulf against attacks from Iran, including sharing radar data with Israel.
o A Greek court overturned a ruling that led to the seizure of an Iranian-flagged tanker in April based on a US request, which resulted in Iran's seizing two Greek tankers in response. The court ruling opens the way to a climb back.
• Coronavirus deaths remain very low in the Gulf, with Qatar not recording any for three months. However, cases are ticking up, and Bahrain, UAE and Saudi Arabia all exceeded 1,000 daily cases for the first time in 3-4 months, having seen cases decline to the low hundreds. This could be the early indication of a wave of breakthrough infections from Omicron subvariants, similar to waves in the US and other countries.