According to industry sources, Iraq has increased its oil exports this year, in spite of the fact that, like fellow OPEC members and other oil-producing countries, it agreed late last year to cut crude production for the first six months of 2017 in an effort to stop the slide of prices.
But with its crude production down, Iraq has looked for another way to maintain its oil revenues. They found it by processing more crude through their own refineries, turning it into high-quality straight-run fuel oil (SRFO), and exporting that.
Iraq’s decision to focus on refined fuel oil has primarily been a way to compensate for the OPEC cut in crude. But it has also contributed to a glut in places like Singapore and the Amsterdam-Rotterdam-Antwerp hub.
The numbers tell the story
It’s been reported that Iraq “exported 500,000 tonnes in March, a rise of 317% compared to the monthly average of 120,000 recorded in 2016.”
In the global bunkering hub of Singapore, 0.94 million tonnes of product were imported in the first quarter of 2017, almost twice the amount imported during all of 2016. These increased volumes appear to be going directly to refineries, to be further refined into diesel, gasoline, or jet fuel.
Impact of fuel prices on shippers
Marine fuel prices in Singapore have been impacted by the glut, writes Rhys Berry, in an article for Bunkerspot. “According to BPi data, since the middle of January, the price of heavy fuel oil (HFO) 380 cSt has fallen gradually from around $347 per metric tonne (mt), bottoming out at $286 mt at the end of March, before mounting a slight recovery. HFO 380 cSt at Singapore is currently hovering above the $300 mt mark.”
It’s no wonder Iraq was reluctant to agree to the OPEC cut-back pact. After all, oil revenues are the lifeblood of its economy. According to the International Monetary Fund, 2014 crude oil export revenue accounted for 93% of Iraq's total government revenues. And the country’s production soared in 2015 – up almost 700,000 barrels per day (bpd)—the largest year-over-year jump since production started to recover in 2004, after the start of the war.