Power plays

Welcome to the latest edition of Oil Titans, a newsletter for people interested in the oil industry — written by me, Noha Mahmoud. Please send your feedback to [email protected] or via Twitter: @nouha_mahmoud

China’s growth vs. global uncertainties

Let’s start with Reuters’ story from Monday on oil prices, initially headlined “Oil rises on Chinese data, Middle East tensions,” which was later changed to “Oil little changed as markets weigh China data, Fed rate cut.”

Why it matters: China's factory activity expanded at the fastest pace in five months in November, according to a private sector survey, signalling potential growth in Chinese oil demand, a significant driver of global energy markets. However, this optimism was largely offset by three factors:

1. The US Federal Reserve is not expected to cut interest rates again at its December meeting. However, Fed Governor Christopher Waller says he's leaning toward a December rate cut, barring any negative data surprises.
2. Tensions in the Middle East, particularly the fragile ceasefire between Israel and Hezbollah, add uncertainty to the oil supply, underscoring how regional conflicts can affect global markets.
3. The upcoming OPEC+ meeting is pivotal. Delaying the planned output increase could stabilise prices, highlighting the group's influence on market dynamics amid surplus forecasts for 2025.

Saudi Arabia claws back Asia

In what may be an early sign of a shift in market dynamics, Saudi Arabia increased its crude oil share in Asia in November at the expense of Russia, which surrendered some of its barrels.

Behind the scenes: Saudi Arabia is regaining market share in Asia's crude oil imports, increasing to 5.83 million barrels per day in November, while Russia's share dropped to 3.51 million barrels per day, the lowest since January.

• Despite raising official selling prices (OSPs) for November-loading cargoes, Saudi crude remains price-competitive in Asia due to recovering refining margins and lower transport costs compared to Russia’s Urals crude.
• Russian oil faces challenges like higher transport costs and sanctions targeting its shadow fleet, which increase logistical hurdles.
• While China and India remain the primary buyers of Russian crude, their imports from Russia declined in November, with both nations increasing purchases of Saudi oil and other Middle Eastern crudes.
• Other Middle Eastern exporters, such as Iraq, Oman, and the UAE, saw rising imports to Asia, benefiting from more competitive pricing relative to Brent-priced alternatives.
• As Asia’s overall crude demand is projected to decline in 2024, maintaining competitive pricing will be critical for Middle Eastern exporters to protect or expand market share.

Rivals or Allies?

In a long-awaited move, Saudi Prince MBS made his first visit to the UAE, the neighbouring country and fellow oil power, since a state visit in 2021, amid rumours of a rift that have surfaced since then.

What they're saying: Saudi Arabia and the UAE are discussing “new crises” and ways to maintain regional stability in the Middle East.

• MBS and MBZ met to focus on the potential for new crises in the region, especially in light of recent developments such as Syrian rebels seizing Aleppo and the ongoing tensions involving Hezbollah and Iran.
• They emphasised the importance of collaborative efforts to ensure the region doesn't spiral into instability.
• This visit also reflects the evolving relationship between the two Gulf powers and highlights their shared concerns over regional security.

Behind the scenes: Saudi Arabia and the UAE present a united front, especially in countering Qatar’s influence, military actions in Yemen, and a shared approach to China and Russia, moving away from US dependence.

But there is a hidden rivalry between the two countries, according to a previous analysis by Foreign Policy.

• Despite appearing allied, both countries are competing for regional and global leadership, particularly in investment, energy politics, prestige, and economic visions.
• The UAE has attracted more foreign investment compared to Saudi Arabia, with Dubai being a top hub for multinational companies. Saudi Arabia is trying to reverse this by encouraging foreign companies to relocate to Riyadh.
• Disputes over oil production cuts within OPEC+ have surfaced, particularly with the UAE resisting Saudi-led efforts, hinting at tensions over Saudi dominance in energy markets.
• Both countries are hosting international events like Expo 2020 (UAE) and Expo 2030 (Saudi Arabia), competing for global influence through sports, concerts, and conferences.
• Saudi Arabia’s Vision 2030 and projects like NEOM aim to rival the UAE’s long-established success in diversification and global trade hubs like Dubai and its ports.
• The rapprochement with Iran reduces shared threats between Saudi Arabia and the UAE, shifting the focus from geopolitics to geoeconomics, increasing competition in trade and industry policies.
• While the UAE normalised relations with Israel, Saudi Arabia has yet to join the Abraham Accords, with a potential divergence in their approach to Israel and related policies.

Plastic pact stalls

Oil-producing states have derailed two years of negotiations on tackling global plastic pollution, as the final round of talks ended without achieving the long-awaited landmark agreement.

Deep divisions remained between a group of nearly 100 "high ambition" countries calling for plastic to be phased out and oil-producing nations who warned this would affect the world's development.

"The objective of this treaty is to end plastic pollution not plastic itself, plastic has brought immense benefit to societies worldwide," said the Kuwait negotiators in the final hours.

Why it matters: With demand for oil expected to decline in sectors like transportation, petrochemicals and plastics remain critical growth areas for oil-exporting nations.

Driving the news: The primary disagreement centres on whether the treaty should enforce cuts in plastic production or focus solely on managing waste through recycling.

• High ambition vs. resistance: A coalition of 95 nations, including the UK, EU, and several African and South American countries, push for legally binding production cuts. Meanwhile, oil-producing countries like Saudi Arabia, Kuwait, and Russia argue such measures could harm global development.
• Environmental impact: Plastic pollution poses severe risks to marine life and ecosystems and contributes to global emissions, currently estimated at 5% of the total.
• Next steps: Talks will continue next year, with calls for the 95-nation coalition to pursue a treaty independently if consensus remains elusive.

That is all for this dispatch from?Oil Titans. Thanks for reading! You can send your feedback by email: [email protected]. If you enjoy this newsletter please do share it with others.