In a number of briefings with vendors and others recently, the middle east has come up as a topic for discussion. It seems this region has grown sharply in terms of CTRM demand and sales and is set to continue to grow. In fact, when we issue our updated CTRM market sizing in the coming weeks, it will have posted some serious gains in terms of market share for CTRM revenues last year and into the future. So what is driving this growth spurt?
Recently, an article over at Oilprice.com got into some of the reasons. We have a few ideas on other reasons. All of them are essentially a reaction to western politics and market interference. Something we have been suggesting would be a factor and it now seems others see it too.
Essentially, we have a couple of big issues in play;
- The Russia-Ukraine war and the sanctions on Russian oil,
- Net zero, ESG and climate politics devised by the west and being implemented in the west by politicians and activist investors.
- Other similar geopolitical issues like Iranian Oil and so on…
A couple of years ago, Amphora did a survey of national oil companies and discovered that many outside the west planned to divorce themselves from western money since it came with handcuffs they didn’t agree with nor wish to tolerate. Instead, they were seeking alternate sources of funding from China and the like while seeking innovative ways to structure deals and contracts to create investment capital and opportunity. Again, to us, this was no surprise and in fact something we would expect. The west often forgets that there is a rest of the world and it may not agree. Since Amphora published its results, the war started and ESG has become more established as a political requirement.
So, Oilprice noted that as Russia finds new markets for its oil, “a whole new industry of oil traders is emerging.” It suggests,
Energy Intelligence reported this month that at least 20 trading companies—but probably a lot more—are sending Russian oil around the world, replacing all the big commodity market players that pulled out of the country after the EU and the G7 began sanctioning it for its invasion of Ukraine.
Vitol, Trafigura, BP, Shell, Equinor—all of them upped and left whatever business they had in Russia, leaving an empty space. It did not take very long for this space to fill, it seems. It has been filled with newly set up trading firms, most of them set up very recently and outside Europe. And they are not trading in dollars or euros.
The trades that these companies are conducting with Russian oil and fuels are being financed by banks in the United Arab Emirates and Turkey, with European banks, like European commodity traders, “out of the picture,” as Energy Intelligence puts it.
Most of the new crop of traders involved in moving Russian crude and fuels around the world are based in Dubai, the Energy Intelligence report notes, but Hong Kong is another hub for such trades.
Not only are these new traders dealing in Russian oil but possibly in other countries product that is more difficult to sell and possibly also in other fossil fuels as well like coal, for example. In essence, places like London are losing out to Dubai and Hong Kong largely because of sanctions and geopolitics. This shift and the emergence of new trading firms is also driving higher levels of demand for software like CTRM and related solutions. Indeed, most of the deals we have heard about in the Middle East have been oil, petrochemicals and other fossil fuels.
It is an interesting dynamic that we will continue to follow and it will certainly impact our next CTRM Market Size forecast.