IRAQ OIL EXPORTS WILL UP
PLATTS - 22 Jun 2021 - Iraq's State Oil Marketing Organization expects its southern oil exports to hover around 2.8 million b/d in July, the marketer's deputy director general told S&P Global Platts, as OPEC's second-largest producer benefits from relaxation of output quotas, lowers crude burn and increases gas output for power generation.
With OPEC and its allies planning to roll back production quotas over the next few months in anticipation of greater global demand for crude oil, Iraq's quota will rise to 4.016 million b/d in July, having been at 3.954 million b/d in June and 3.905 million b/d in May.
"Because of the good performance in compensating some of our overproduced quantities, it [southern oil exports] may be under the same average of 2.8 million b/d or slightly higher because we will have less local consumption," Ali al-Shatari said.
"July is nearly the end of the peak of summer, so there will be less local consumption. By the substitution of direct burning of crude with gas and fuel oil, we will be in a better position to export those barrels."
Iraq is burning a minimum amount of crude and using fuel oil for power generation to free up oil for export. With higher oil production in July, Iraq will be able to produce more associated gas, which is primarily used for power generation.
Previously crude burn rose in the hot summer months as residents crank up their AC to cool down temperatures that can hit 50 degrees Celsius in the south, leading to higher oil consumption.
Federal Iraq's crude consumption reached 464,000 b/d in May, according to SOMO figures.
Higher production quotas in July will allow Iraq to export more of the Basrah Medium crude that was introduced in January, Shatari said. SOMO introduced the Basrah Medium grade after splitting its Basrah Light, the country's biggest crude stream, in two to preserve the stability of exports and meet customer demands.
"Any increase that may come from the OPEC+ agreement and any release of quantities it should add up to the quantities of Basrah Medium because of the huge demand we have for Basrah Medium," Shatari said.
SOMO exported 1.013 million b/d of Basrah Medium in May, nearly 14% more than the 891,000 b/d exported in January, SOMO figures show.
Basrah Medium has become Iraq's most popular export grade out of its three Basrah crudes, especially in Asia and demand "is getting better than what we expected and more and more requests for the increase in the quantity of Basrah Medium are coming from our customers," Shatari said.
The two biggest markets for Basrah Medium are India and China, who are buying nearly equal volumes of the grade, he said. Iraq was the third biggest oil exporter into China in May, after Saudi Arabia and Russia. Iraq is the top oil supplier to India, the world's third largest oil importer.
Overall, Iraqi exports to India have not diminished despite the nationwide lockdowns, Shatari said.
India imported 18.26 million mt of crude in April, or an average 4.5 million b/d, up 10.3% year on year, according to provisional data from the country's Petroleum Planning and Analysis Cell, reflecting a lower base in the year-earlier month when India was under nationwide coronavirus lockdown.
Iraq plans to defend its market share in India despite the potential return of Iranian crude to the global markets, Shatari said.
India is expected to start importing Iranian crude again once US sanctions are lifted on Iran.
Iran and US are currently conducting indirect talks in Vienna to hammer out a nuclear deal after Washington withdrew from the Joint Comprehensive Plan of Action in 2018 and slapped sanctions on Tehran, lowering its oil exports.
In 2020, Iranian crude inflows into India dropped to zero for the first time, giving Iraq an opportunity to grab a market share of as high as 25%, with shipments of about 50.17 million mt that year, up from 45.88 million mt in 2019, according to shipping data.
Iran supplied 795,000 b/d of crude to India in 2017, 470,000 b/d in 2018, while it dropped to 90,000 b/d in 2019, according to shipping data.
Some of Iran's heavy sour grades compete directly with Basrah Light, Basrah Medium and Basrah Heavy.
"If Iran comes back, we cannot say that they will take our position, we cannot say that we will stay but we will work to stay based on the competition we have," said Shatari.
"From my talk with customers [globally], they realize the position of Iraq as a future supplier of energy and crude oil ... for their refineries rather than maybe others who may not be in a position to keep their momentum and stability in satisfying their needs."