In May, Asia’s fuel oil imports from Iraq surged to a four-month high, reaching a total of 910,000 metric tons, equivalent to roughly 186,400 barrels per day. This figure marks the highest import levels since January and represents an increase of over 40% from the previous month. The uptick, as reported by trade sources and data from shipping analytics firm Kpler, is attributed to stronger refining margins that have spurred increased output and exports from Iraq, OPEC’s second-largest producer.
Iraq’s increased exports play a crucial role in enhancing its oil revenues, especially as Baghdad implements measures to cut crude oil shipments in line with its commitments to compensation cuts within the OPEC+ framework. Notably, the impressive rise in exports coincided with record-high premiums for 380-cst HSFO refining margins to Dubai crude. A significant portion of these cargoes has been dispatched to Singapore for blending into the local bunker fuel pool, as the overall demand for high-sulphur fuel oil (HSFO) at Asian refineries remains subdued.
The Iraqi state oil company, SOMO, did not provide comments on the matter. Iraqi fuel oil, characterized by its high sulphur content, can be processed by refiners into more valuable products or blended by traders for supply to ships. As a result, exports of Iraqi fuel oil have been on an upward trajectory in recent years, reaching new annual highs last year.
Despite the recent surge in exports, future Iraqi shipments may decline as refiners’ margins have begun to drop from their peak levels. Additionally, with rising domestic demand for power generation amid summer heat, there is an expectation that Iraq will increase its consumption of liquid fuels. Analysts suggest that if economic factors shift, export volumes could diminish.