Iraq Faces Disruption as Russian Oil Heads East

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Mideast producers are bracing for disruption as Western sanctions force Russian oil to greatly expand market share in Asia. Iraq, for one, faces potentially serious challenges in carving out alternatives. For now, Iraqi officials appear comfortable with levels of Asian demand, but are keeping a close eye on the situation. Some signs of pressure are already evident: China’s demand for spot cargoes from the Mideast has been relatively soft, and Iraqi state marketer Somo last week failed to award a tender for July-loading Basrah Heavy. But at a meeting in Singapore last weekend, Somo’s main Asian customers all expressed interest in buying more Basrah crude, according to a senior Somo official. “Before the meeting, yes, I think we were worried,” he told Energy Intelligence, referring to the sharp rise in the sale of discounted Russian crude to China and India that threatens to erode the market share of the top Mideast Gulf producers. The official argued that Russian crude volumes diverted to India and China remain relatively modest in an Asian market that gobbles up roughly 35 million barrels per day. But those Russian flows east are rising. China’s Russian oil imports hit a record of almost 2 million b/d in May, up 400,000 b/d from April — and customs data show Russian crude selling at $16 per barrel less than rival Saudi imports. India’s May imports of Russian crude more than doubled versus April to 850,000 b/d. Those flows appear to be taking on a more permanent character, with Indian refiners like Bharat Petroleum discussing term contracts with Russia despite Western pressures.

Opec-Plus Supply , Oil Trade, Oil Demand, Oil Term Contracts, Crude Oil
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