Flow of Iraqi oil to US reaches 3-year peak

Kuwait Times - - BUSINESS -

LON­DON: Oil tankers are set to de­liver the big­gest vol­ume of Iraqi crude to US shores in more than three years, as OPEC’s sec­ond­largest pro­ducer vies for mar­ket share as pres­sure mounts on US shale pro­duc­tion. Ac­cord­ing to Reuters ship­ping data, tankers car­ry­ing nearly 20 mil­lion bar­rels of Iraqi oil are due to sail to the United States in Novem­ber, al­most 40 per­cent above the amount booked to ar­rive in Oc­to­ber. At an av­er­age rate of more than 660,000 bar­rels per day (bpd), it would be the largest monthly im­port since mid-2012, ac­cord­ing to US data.

The sup­ply surge is emerg­ing at a time when low oil prices are muscling US shale pro­duc­ers out of the mar­ket, height­en­ing com­pe­ti­tion among some OPEC mem­bers to se­cure mar­ket share.

In Europe, Saudi Ara­bia is tar­get­ing tra­di­tional buy­ers of At­lantic Basin and Rus­sian crudes. In the United States, where Saudi Ara­bia has long been the big­gest OPEC sup­plier, fa­vor­able prices are help­ing Iraq re­gain share among US re­fin­ers that run heav­ier, high sul­fur or sour grades. “There’s been a pull from the Gulf Coast for heav­ier and medium sour bar­rels and Basra Heavy been a part of that pic­ture,” En­ergy As­pects an­a­lyst Richard Mallinson said. “If the pric­ing has got good when re­fin­ers are look­ing to (switch), then it comes on to the shop­ping list.”

The Or­ga­ni­za­tion of Petroleum Ex­port­ing Coun­tries is all but cer­tain to stick to its pol­icy of pump­ing oil at record rates to re­tain mar­ket share, as the price of a bar­rel of oil strug­gles to break above $50 a bar­rel. Traders may have also spied a win­dow of op­por­tu­nity to move Iraqi crude to the United States, as the spread be­tween US bench­mark crude WTI and its Mid­dle East equiv­a­lent Dubai one-month swaps have fallen to a dis­count of around 30 cents, from a pre­mium of $4 a bar­rel just a few weeks ago. To­tal US shale pro­duc­tion is set to de­cline 118,000 bar­rels per day (bpd) in De­cem­ber, the big­gest monthly de­cline on record, to 4.95 mil­lion bpd, the least since Sept. 2014, ac­cord­ing to data from the En­ergy In­for­ma­tion Agency.

Iraq cut its of­fi­cial sell­ing price of Basra Heavy to the United States to a dis­count of $5.85 a bar­rel ver­sus the US sour crude bench­mark for Novem­ber, the low­est since it be­gan sell­ing the grade ear­lier this year, while cut­ting Basra Light by 50 cents for Oc­to­ber.

Mars Sour crude is com­mand­ing a dis­count of around $3.00 to $2.00 a bar­rel to WTI fu­tures.

“We have definitely seen a pickup ... in Oc­to­ber in PADD 3, which is the Gulf Coast in (im­ports of) medium and heavy grades. It’s not just Basra Heavy, we saw Maya and we saw Kuwait ex­port blend,” Mallinson said.

It is not just non-OPEC bar­rels that Iraq must com­pete with. Saudi Ara­bia, along with some other OPEC mem­bers, have de­liv­ered cuts to their of­fi­cial sell­ing prices to buy­ers in Europe and the United States in their quest to for mar­ket share, par­tic­u­larly as consumption in Asian hot spots such as China ap­pears to be mod­er­at­ing. “In spite of strate­gic stock-build­ing by China and In­dia, Asia has be­come a con­gested mar­ket,” BNP Paribas an­a­lysts said in a re­cent re­port. “Con­se­quently, Saudi Ara­bia and other OPEC mem­bers like Iraq, have re­cently stepped-up mar­ket­ing ef­forts else­where to di­ver­sify their ex­ports des­ti­na­tions.” — Reuters

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