Tuesday 19 March 2024
 
»
 
»
Story

Unipec will lift 10 million barrels of Iraq crude a month

China ends near decade of rising Iraq crude oil orders

SINGAPORE, December 18, 2014

Chinese oil firms will keep the amount of crude they buy from Iraq unchanged in 2015 for the first time in almost a decade, as the need for imports falls and concerns over the quality of the oil persist, five sources with knowledge of the situation said.
 
The varying quality of Basra Light, Iraq's key export grade, has been a concern for buyers, while demand growth in China has also been slowing allowing oil firms to cherry pick purchases from global suppliers.
 
Oil prices have fallen more than 40 per cent since June as a supply glut clashes with cooling demand, putting producers under pressure as consumers have more choice at lower costs.
 
"There is a lot of competition to supply," IHS consultant Victor Shum said. "China has a lot to choose from."
 
A drive by China, the world's top energy consumer, to secure oil for its fast-growing economy has seen its imports from Iraq soar. The Opec producer has become China's fifth-largest oil supplier behind Saudi Arabia, Angola, Russia and Oman.
 
China's crude imports from Iraq rose in the first ten months of the year by nearly a quarter to 23.49 million tonnes (566,387 barrels per day), compared with the same period of 2014, Reuters data showed.
 
In contrast, China imported just 1 million tonnes of oil from Iraq in 2006.
 
END OF LONG RISE
 
Four Chinese firms with annual oil contracts with Iraq's State Oil Marketing Organization (Somo) will keep 2015 purchases steady for the first time since 2006, the sources with knowledge of the firms trading strategies said.
 
Unipec, the trading arm of Asia's largest refiner Sinopec, will lift about 10 million barrels a month, and Sinochem up to 6 million barrels, according to sources.
 
CNOOC, Zhenhua Oil and Chinaoil, the trading arm of PetroChina, will each have about 2 million barrels per month, the sources said. These volumes do not include equity shares from production sharing contracts held by Chinese firms in Iraq.
 
Somo, PetroChina, CNOOC and Sinochem did not respond to emails requesting comment, while Sinopec declined to comment.
 
Iraq will give a higher discount for heavy crudes it exports from its port of Basra over quality issues, sources have previously said. 
 
CHINA'S IMPORTS SLOW
 
Another factor behind slowing demand for Iraqi oil is that China's own import needs are not rising as fast.
 
China's crude imports are expected to post a rise of 400,000 barrels per day in 2015, compared with 500,000 bpd this year, said Amrita Sen of Energy Aspects.
 
"Regarding crude imports, it will be a function of SPR (strategic petroleum reserves) and commercial inventory fills," Sen said, rather than one of meeting direct consumer demand. 
 
The actual amount of crude Iraq delivers to China next year may also be determined by factors outside the order book.
 
This year, Iraq was unable to deliver full contractual supply due to technical and security problems: Chinese buyers signed deals to double Iraqi crude imports in 2014 but Iraq only managed to supply a quarter more.
 
Despite this, China is expected to increase crude imports from the world's fastest-growing oil exporter in the long run.
 
"Beyond next year, Iraq has the potential to provide sustained incremental supply far into the future," IHS' Shum said.-- Reuters
 
 



Tags: China | Iraq | Crude |

More Energy, Oil & Gas Stories

calendarCalendar of Events

Ads