The United Arab Emirates is selling 1.7 million barrels of Saudi Arab Light crude oil in a rare tender, with the cargo coming from a tanker that was struck by an unidentified projectile in the Gulf last month.

The sale was revealed in a tender document seen by Reuters, which reported the story on Tuesday. Three trade sources confirmed the offer, underlining how the war between the United States and Israel on one side and Iran on the other is still disrupting shipping and oil trading across the Gulf.

Oil from the damaged Gem No. 2 tanker

Sources told Reuters the crude was loaded aboard the Gem No. 2, a very large crude carrier that was hit by an unidentified projectile last month. The UAE said last week that an oil leak from the vessel had been stopped, after oil washed up on beaches in the northern Emirates and a clean-up operation was launched along the coast.

The tender names the UAE Ministry of Energy and Infrastructure as the seller, acting under judicial supervision by the UAE Federal Public Prosecution. It offered the cargo for loading between 10 and 20 November through a ship-to-ship transfer from inside the Gulf. The tender closed on Monday.

One document put the parcel at 1.7 million barrels, while a second document seen by Reuters put the volume at 1.87 million barrels. One trade source said the terms for the Saudi cargo were similar to those offered by the UAE's Abu Dhabi National Oil Co, known as ADNOC.

Why the sale is unusual

It is highly unusual for one Gulf state to sell another country's crude. Saudi Arab Light is the flagship grade of Saudi Aramco, the world's largest oil exporter, and it is normally marketed by the kingdom itself. The fact that the cargo is being sold by the UAE, under the supervision of its federal prosecutors, reflects the legal and practical problems left behind by the attack on the tanker.

Since the US-Israeli war with Iran began, attacks on commercial vessels in Gulf shipping lanes have driven up security risks for maritime traffic and raised fears about the environmental fallout from damaged tankers. Insurers, shipowners and traders have had to weigh the danger of moving through waters where vessels have come under fire.

What happens next

The cargo is due to be lifted by ship-to-ship transfer inside the Gulf between 10 and 20 November. Traders will watch who buys the barrels and at what price, as the sale will give a fresh signal about how the market values crude caught up in the region's conflict.

The attack on the Gem No. 2 has not been claimed by any group, and no authority has publicly named who was responsible. The UAE has not said when the vessel itself will be repaired or returned to service.