Daily Update: May 18, 2021

Subscribe on LinkedIn to be notified of each new Daily Update—a curated selection of essential intelligence on financial markets and the global economy from S&P Global.

The global oil market is already poised for a recovery from the coronavirus-caused demand destruction in the second half of this year. Renewed relations between the U.S. and Iran to re-establish the 2015 nuclear deal could usher the Middle Eastern economy’s oil output into the flow of the global industry’s new reality.

As talks between the two countries and European nations, which started in Vienna this April, to determine how Iran can return to nuclear compliance continue, experts expect a sanctions relief agreement within the Joint Comprehensive Plan of Action to be reached within weeks.

"I don't know if we'll see a deal this month, but the atmospherics have never been more favorable," Matthew Reed, vice president of Foreign Reports, told S&P Global Platts. "The U.S. and Iranian positions are indistinguishable at this point. The posturing phase is over. Now both sides are pushing to revive the JCPOA lock, stock and barrel—no complications or changes. Everyone knows what has to be done. It's just a matter of timing each step.”

While it may be too soon for companies to return to Iran, the eventual outcome is likely to have meaningful implications for oil activity in the country and around the world.

S&P Global Platts Analytics expects a framework deal including a possible sanctions waiver that allows Iran up to 500,000 barrels per day in oil sales to solidify by the end of May—followed by full sanctions relief by the end of September. If and when the sanctions are lifted, Iranian crude and condensate exports will likely climb from the 800,000 barrels per day seen last month to 1.4 million barrels per day this December, according to S&P Global Platts Analytics. Ultimately, 2 million barrels per day of Iranian crude could return to the market by January 2022. Iran said it expects to export as much as 2.5 million barrels per day of crude, in three months or more after the sanctions are lifted.

"In my expertise and experience in the area of oil, my priority is processing crude oil into oil products," the country's former oil minister, Rostam Ghasemi, who is now running for president, told S&P Global Platts in an exclusive interview. "This must happen, because it guarantees our national security in the global oil market, even under sanctions. Under any conditions, it's possible to sell oil products. Secondly, it brings added value and can create jobs."

Washington has insisted it won’t lift sanctions until Tehran pares nuclear-enrichment activities from the accelerated levels in recent months into compliance with the original JCPOA limitations. Tehran has asked Washington to scale back the strict sanctions implemented by the Trump Administration, affecting institutions from its central bank to its supreme leader, when the U.S. withdrew from the JCPOA in 2018. Policy experts see Tehran as willing to comply, and U.S. President Joe Biden aiming to secure an agreement on an accelerated timeline ahead of the Iranian presidential election in June without being seen as soft on foreign policy by Congress.

"Progress in Vienna is slow but steady … We've seen flexibility from both sides as Biden is now willing to move first, and Tehran understands some sanctions will stay,” Fernando Ferreira, director of Rapidan Energy Group's Geopolitical Risk Service, told S&P Global Platts. "We don't see any insurmountable obstacles to reaching a deal … Tehran has indicated it is willing to compromise on its maximalist demands, such as removing the Foreign Terrorist Organization designation on the IRGC and lifting sanctions on several entities linked to the Supreme Leader."

Today is Tuesday, May 18 2021 and here is today’s essential intelligence.

Uncertainty in the Global Economy

Solid U.S. Retail Sales Suggest Risk Of Spending Shift To Experiences From Some Categories

U.S. shoppers kept spending in April matching retail sales in March underpinned by stimulus funding, higher savings, and rising consumer confidence. Home-related goods benefited from stay-at-home trends despite better weather, a healthy pace of vaccinations, and relaxed social distancing requirements.

—Read the full report from S&P Global Ratings

The Credit Cycle

The Biden Tax Proposal Would Increase The Amount Companies Pay, With Limited Effect On Ratings

Multinational corporations with substantial overseas earnings largely in sectors such as technology and health care would be subject to significant international tax changes to end offshoring and profit-shifting incentives under the Biden tax proposal.

—Read the full report from S&P Global Ratings

LIBOR Transition: Laws Won't Eliminate All Uncertainty

Legislation is progressing in the U.S., EU, and U.K. to address the phase-out of LIBOR. These laws aim to enhance an orderly transition to new benchmarks. However, S&P Global Ratings does not think they will remedy every aspect of the move away from LIBOR.

—Read the full report from S&P Global Ratings

Technolog & Media

Global Internet Outages Resume Upward Trend In 2nd Week Of May

Global internet outages increased by 16% to 290 during the week of May 8, reversing a brief decline seen the prior week, according to data from ThousandEyes, a network-monitoring service owned by Cisco Systems Inc

—Read the full article from S&P Global Market Intelligence

Discovery, Warnermedia Merger Likely To Pass Regulatory Scrutiny – Analysts

While AT&T's plan to combine its Warner Media LLC entertainment, sports and news operations with lifestyle network owner Discovery Inc. to form a new stand-alone company is likely to face scrutiny from U.S. regulators, media analysts say they ultimately expect the deal to win approval in time to close next year as planned. By contrast, it took AT&T about two years to close the original deal to acquire the Warner Media assets.

—Read the full article from S&P Global Market Intelligence

FCC Wants To Cut Robocalls From Smaller Operators

The Federal Communications Commission has long battled the issue of robocalling, requiring major voice service providers to help stop the problem and limiting the number of allowed telemarketing calls. Yet the issue has continued as bad actors harass millions of Americans with unwanted calls, ranging from health-related scams to fake banks offering credit card interest rate discounts.

—Read the full article from S&P Global Market Intelligence

ESG in the Time of COVID-19

The Price Of Impact: South Africa's Social Bonds Offer Reward Despite Challenges

Yield-seeking institutional investors are considering buying into South Africa's fledgling market for social impact bonds, although high costs and a lack of standardization could prove a deterrent.

—Read the full article from S&P Global Market Intelligence

Industry Consortium Pushing To Commercialize Green Hydrogen In California By 2030

A western US power industry consortium is creating a commercial green hydrogen cluster at scale with a goal of achieving green hydrogen procurement at $1.50/kg in the Los Angeles Basin by 2030, the group said May 17.

—Read the full article from S&P Global Platts

India CEO Series: Retail Gas, LNG By Trucks, Hydrogen Figure In H-Energy's Growth Vision

India's H-Energy is expecting that the start of its FSRU-based LNG regasification terminal will help to push its strategic expansion plans forward by helping capture a substantial share of India's gas market, as well as realizing its vision to make inroads into the retail gas and hydrogen sectors, the company's CEO told S&P Global Platts.

—Read the full article from S&P Global Platts

The Future of Energy & Commodities

Market Movers Americas, May 17-21: Markets Ease Following Colonial Pipeline Restart

In this week's Market Movers Americas, presented by Jacquelyn Melinek: New York Harbor product cracks ease following Colonial restart, U.S. continues to lead global LNG supply surge, U.S. hot-rolled coil demand remains strong despite record prices, Brazilian pig iron prices continue climb on strong demand, higher costs

—Watch and share this Market Movers video from S&P Global Platts

DAPL Cites Colonial Pipeline Outage As Reason To Remain Open

The owners of the Dakota Access Pipeline cited the recent Colonial Pipeline outage from a cyberattack and a May 16 train derailment in Iowa as reasons to keep the major Bakken Shale crude oil artery open as it faces a potential court-ordered shutdown.

—Read the full article from S&P Global Platts

EIA Ups US Unconventional Oil Output Growth Estimate For May More Than Sevenfold

The US Energy Information Administration increased its projection for month-on-month growth in US unconventional oil output for May by more than sevenfold in its latest Drilling Productivity Report.

—Read the full article from S&P Global Platts

S Korean Refiners Bearish On 2021 Jet Fuel Exports As Air Traffic Remains In Doldrums

South Korean refiners are unlikely to post any meaningful recovery in aviation fuel exports for the rest of 2021, as major Asian transportation fuel suppliers do not expect to see international air travel normalize this year, though strong air cargo demand may offer some respite to jet fuel sales.

—Read the full article from S&P Global Platts

Written and compiled by Molly Mintz.