Baghdad expects European demand for Iraqi crude as an alternative to the Russian
"There is more European interest in us now that China and India are buying more Russian oil," one of the officials told S&P Global Commodity Insights.
This is a small change in policy for Iraq, which in recent years has allocated about 70% of its oil to Asian buyers, supporting the push of the second-largest producer in the Organization of the Petroleum Exporting Countries to prioritize sales in the most lucrative market.
But countries like China and India have renewed their appetite for Russian oil, which has been trading at record low prices since the invasion of Ukraine.
Meanwhile, Europe, which has been the biggest buyer of Russian crude, is looking for alternatives.
"We are now seeing adjustments in our traditional crude flows. Refineries in northwest Europe are looking more at our crudes," the official added, stressing the similarities in quality between Iraqi crude and Russian Urals crude.
European oil traders echoed these comments, saying that Iraq's mid-grade Basra had emerged as the preferred crude for refineries in the Mediterranean and northwest Europe that had shifted from the Russian Urals.
A crude oil trader said, "Crude oil like Iraq's Basra Medium and Basra Heavy is entering Europe well, but in Asia it is being replaced by the Urals, and Chinese demand is not very strong."
A second crude oil trader said, "Basra crudes will most likely benefit from the punishment of Russian crude."
Both Basra Heavy and Basra Medium are loaded from the country's southern oil export terminals and single-point marinas in the Persian Gulf.
Dealers said Basra Medium and Basra Heavy's official selling prices to Europe for June were down $1.90 a month on a monthly basis, making them more attractive and a spillover effect of the significant drop in the value of the Urals since the invasion of Ukraine.
Europe is particularly dependent on Russian oil and was importing about 2.7 million barrels per day of crude oil and another 1.5 million barrels of products, mostly diesel, before the invasion of Ukraine.
On May 4, the European Union said it intended to phase out Russian oil imports into the trading bloc by the end of the year. But due to self-sanctions, some European refiners and independent traders have already reduced seaborne flows of Russian Urals crude, heavy fuel oil, gas oil and naphtha to the region.
Iraq expects more of its crude to flow to Europe in the coming months, as refineries look to make up for the shortfall in Russia.
SOMO officials said volumes could be boosted with one-point repairs at the Basra port that are due in June and, when completed, would add 100,000 barrels per day of export capacity.
Officials said current exports from Basra were set at 3.27 million barrels per day
Refineries in Europe are often complex and dependent on a diet of raw materials such as the Russian Urals, Iraq's Medium Basra, Basra Heavy, and Saudi Arabia Light.
Iraq's crude oil exports to Europe have averaged 528,000 bpd so far in 2022 compared to 439,000 bpd and 431,000 bpd in 2021 and 2020, respectively, according to data from commodity intelligence firm Kpler.
The Russian Urals are classified as medium pH, with a specific gravity of about 31-32 API with a sulfur content of 1.7%.
This makes it very similar in quality to other medium sour crudes such as Basra Medium, Saudi Arabian Medium, Al Arabiya Heavy, Iranian Heavy, Brazilian Meru and Omani Crude Blends.
[You must be registered and logged in to see this link.]