India’s oil imports from Iraq surged to a record high in August as refiners replaced costly African imports with cheaper Basra crude, tanker arrival data obtained from industry and shipping sources showed.
The world’s third biggest crude oil importer shipped in about 1.32 million barrels per day (bpd) of Iraqi oil last month, about a third more than July and 29 per cent higher than August 2018, the data showed.
African crude imports fell 18.3 per cent to 764,500 bpd as prices for heavy sweet crudes from Angola, Cameroon and Chad - sought by China’s so-called teapots (small refiners) and major refiners ahead of IMO 2020 - rose.
Production cuts by the Organisation of the Petroleum Exporting Countries and US sanctions on Iran and Venezuela tightened heavy sour crude supplies, also enabling Iraq, OPEC’s no 2 producer, to gain market share in India.
‘In the spot market, Saudi and the UAE (United Arab Emirates) barrels are not available while Iraqi oil was easily available in spot markets at attractive prices, prompting refiners to maximise purchases of Iraqi oil,’ said Refinitiv analyst Ehsan Ul-Haq.
He said Iraq’s Oil Marketing Company (SOMO) has been selling oil through spot tenders as it boosts output.
SOMO sold July-loading Basra Heavy crude at a lower premium to the grade’s official selling price (OSP) through tenders.
Iraq held its position as the top oil supplier to India followed by Saudi Arabia, the data showed.
Iraq has been pumping 4.8 million bpd in recent months instead of its target of 4.5 million bpd, while Saudi Arabia has been producing below the targets.
India’s overall imports during August were about 4.7 million bpd, same as in the year ago month, the data showed.
Indian refiners, like their global peers, are preparing to maximise production of very low-sulphur fuel oil (VLSFO) to supply ships from 2020.
From Jan. 1, the International Maritime Organisation (IMO) will bar ships from using fuels containing more than 0.5 per cent sulphur - compared with 3.5 per cent currently - to reduce air pollution.
‘Some complex Indian refiners like Reliance can even produce very low-sulphur fuel oil with high-sulphur oil like Basra Heavy,’ Haq added.
Reliance Industries doubled Iraqi oil imports in August from the same month last year to about 1.8 million tonnes, the data showed.
Due to higher imports from Iraq and Saudi Arabia, India’s overall imports from the Middle East rose to 16 per cent in August from July, the data showed.
Its imports from Venezuela in August averaged 412,000 bpd, the data showed, growth of 48 per cent from July.
Nigeria continued to be the third biggest oil supplier to India.