Middle East supply tightness now showing signs of relaxation! UAE to hold its first auction at the end of February to sell 14 million barrels of crude oil.

The Abu Dhabi National Oil Company (ADNOC) of the United Arab Emirates is selling large amounts of crude oil from the Persian Gulf to traders and refineries in Asia. This is the first tender for this grade of crude oil since the outbreak of the Middle East war at the end of February. According to traders familiar with the matter, at least 14 million barrels of UAE crude oil (including Upper Zakum, Umm Lulu, and Das grades) were sold through a tender that ended last Friday. They said that the scale of future sales may further expand as ADNOC is conducting another round of similar tenders, which will end this weekend. These crude oil will be shipped and delivered between June and August. Traders mentioned that most of the sold oil is Upper Zakum crude oil, which is usually exported from Zirku Island located in the Persian Gulf. However, these crude oil can be delivered at locations including Fujairah and Sohar, which are outside the Persian Gulf, thus bypassing the blocked Strait of Hormuz. Traders stated that this batch of crude oil has been sold to refineries in Asian countries such as China, Japan, South Korea, and India. They added that most of these Gulf crude oil cargoes were traded at a premium of only a few dollars over the Dubai benchmark price, with at least one cargo sold at a discount of about $1 per barrel from that benchmark price. This may indicate that the UAE is trying to grab market share by offering discounts. Although the total amount of crude oil sold is still much lower than pre-war levels, the UAE is gradually increasing the flow of crude oil transported through the Strait of Hormuz to provide additional supply to the market, which is still lacking Middle Eastern oil supply. Data tracking oil tanker shipments shows that the observable crude oil export volume from the UAE in May was around 2.6 million barrels per day. This increase is likely due to some crude oil tankers successfully passing through the Strait of Hormuz, with some crude oil transported through underground pipelines to Fujairah Port for export. It is reported that ADNOC currently operates a pipeline that is 252 miles (about 406 kilometers) long with a daily oil transportation capacity of 1.5 million barrels. This pipeline has become the "energy lifeline" of the UAE during the blockade caused by the Middle East situation in the past few months. However, the pipeline's capacity is still less than half of its normal export volume, severely restricting the UAE's oil revenue. Therefore, ADNOC is accelerating the construction of a pipeline from inland oil fields to Fujairah Port. Due to the Middle East war, the UAE has expedited the construction of this project. The pipeline is expected to be operational in 2027. The new pipeline will double ADNOC's export capacity through Fujairah Port, enabling the UAE to reach a total export capacity of 3 million barrels per day by bypassing the Strait of Hormuz. Last month, Sultan Ahmed Jaber, the CEO of ADNOC, stated that the construction of the seco...