OPEC’s second-largest producer, Iraq, more than doubled its crude oil exports via the Strait of Hormuz in August as it offered month-watering discounts for loadings at Basrah in the Persian Gulf and Iran allowed Iraqi oil cargoes to transit the chokepoint.
Iraqi oil exports jumped to some 2.34 million barrels per day (bpd) in August from 1.35 million bpd in July, two Iraqi energy officials told Reuters, in data consistent with estimates of vessel-tracking firms Vortexa and Kpler, who see Iraq’s oil shipments at between 2.2 million bpd and 2.3 million bpd last month.
Although these volumes continue to trail the pre-war levels of over 3.5 million bpd, the increased flows would benefit those refiners in India and China that are geared to process the heavier and higher-sulfur crude from Iraq.
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Last month, Iranian state media reported that Tehran had granted permission to a number of oil tankers with Iraqi crude to transit the Strait of Hormuz, which has eased Baghdad’s export bottleneck.
It’s not clear if all Iraqi oil tankers are allowed to move through the Strait of Hormuz by Iran. But even some batches of tankers are certainly some relief for Iraq, which has seen the worst of the Middle East crisis as its heavily oil-dependent economy was collapsing with the trickling oil revenues amid the blockage of the Strait of Hormuz.
Due to the de facto closure of the Strait of Hormuz, Iraq was forced to slash its oil production as its exports from Basrah need to transit the world’s most vital oil chokepoint.
The Iranian corridor out of the Gulf added to considerable discounts Iraq has offered buyers to encourage them to send tankers to pick up crude from Basrah, according to various reports and analysts.
“Iraq has been giving heavy discounts … which has incentivised buyers to find shipping options to get the cargoes out,” Sparta Commodities senior analyst June Goh told Reuters.
As a result, Chinese and Indian refiners have received Basrah crude cargoes in recent weeks and have chartered tankers to lift additional volumes from Basrah in the coming weeks.
China’s refiners alone are estimated to have bought at least 16 million barrels of Basrah crude for September delivery, trade sources told Reuters.
By Tsvetana Paraskova for Oilprice.com
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