Iraq’s January Output Hits 10-Month Low

Iraq’s crude output fell by around 100,000 barrels per day in January to 4.29 million b/d, according to Energy Intelligence estimates, its lowest in 10 months and 140,000 b/d below its Opec production target, due to weather-related loading disruptions at Basrah and refinery turnarounds.

The disruptions at the Basrah terminal accounted for most of the 128,000 b/d drop in total exports of Iraqi crude in January, although piped Kurdish crude exports were also down by around 37,000 b/d.

“Seven days of bad weather made it very difficult for the mooring and departure of the vessels, and very bad for the pumping. So sometimes we fully stopped the pumping and loading (in January),” said a senior official at state oil marketer Somo.

The loading disruptions caused a sizeable build in Basrah crude stocks and forced the oil ministry to cut production. The Somo official said output was reduced at fields producing Basrah Heavy and Basrah Medium.

Iraq’s crude production was also impacted by refinery run reductions of 60,000 b/d in January, related to scheduled turnarounds, and the official said it was unlikely that the new Karbala refinery — which should eventually raise Iraq’s refining capacity by 140,000 b/d — would start commercial operations next month as planned.

Iraqi production is expected to remain curtailed in February given further Basrah loading disruptions at the start of the month and planned maintenance at the Lukoil-operated West Quran-2 oil field. The latter was expected to take 400,000 b/d offline for 10 days starting Feb. 20.

Kurdish Discount, Kirkuk Premium

In a blow for the Kurdistan Regional Government (KRG), Trafigura this month confirmed that it has ended a long-term crude marketing contract with the semi-autonomous government.

Somo has warned of legal action against companies lifting Kurdish crude, or KBT. But the Swiss-based trading house is also reportedly in a dispute with the KRG over prepayments it is still owed and Erbil’s refusal to renegotiate the terms of the contract based on Kurdish crude’s widening discounts to Brent of as much as $20 per barrel.

Reflecting the strong European demand for “legitimate” medium sour Iraqi crude, the Somo official said the February-loading 600,000 bbl cargo of Kirkuk crude that the company offered via tender last month was sold at a premium to the official formula price (OSP) of $0.80-$1.00/bbl. The February OSP for Kirkuk was set dated Brent minus $3.45/bbl, while for March cargoes the discount was narrowed to just $1.45/bbl.

India Dilemma

Ship tracking data show that Basrah crude exports to India continue to face serious competition from Russian barrels, and higher demand in Europe has not offset the lost market share.

Basrah exports to India fell to 850,000 b/d in January, which compares with 1.14 million b/d in the first six months of last year, when India consistently beat China as the top destination for Iraqi crude.

Basrah exports to Europe, meanwhile, stood at 517,000 b/d in January, which is up by just 15,000 b/d compared with the first six months of last year, but still below the 12-month average of 550,000 b/d.

Developments in the upstream offer Iraq some hope in terms of locking in long-term Asian demand.

Indonesia’s Pertamina this month agreed to buy an additional 10% in the 500,000 b/d West Qurna-1 oil field from departing operator Exxon Mobil, doubling its existing interest in the project.

Over the past few years, Pertamina has been processing its crude from Iraq at third-party refineries like Shell’s Bukom, since its own six refineries are not sufficiently complex to process Basrah. But the Indonesian national oil company is working on changing that with its proposed 300,000 b/d Tuban refinery.

Slated to be sanctioned by the end of this year, with a potential start of commercial operations in 2028, Tuban would enable Pertamina to process a broad range of crude grades like Basrah.