Iraq boosts oil sales to China, US, India before OPEC supply cuts bite

If Iraq increases its sales to China while others have to cut back or just hold their volumes steady, Iraq will inevitably gain market share in what is arguably the most important oil market.

SINGAPORE/BEIJING: Iraq is selling more crude oil to its biggest customer, China’s Unipec, people familiar with the matter say, digging a deeper foothold in the global supply market just before production cuts agreed with OPEC and other producers are scheduled to kick in.
With new deals with Indian and US refiners also coming on stream, the expanded contract with the trading arm of Asia’s largest refiner Sinopec (600028.SS) means Baghdad will have to reduce supply to other clients to honor its commitment to cut output by 210,000 barrels per day (bpd) from 2017.
Three people with knowledge of the matter said the Unipec contract was signed just before the Organization of the Petroleum Exporting Countries (OPEC), of which Iraq is a member, agreed with other producers led by Russia to cut output by as much as 1.8 million bpd in an effort to reduce a global fuel supply overhang and prop up prices.
Speaking on condition of anonymity because they were not authorized to speak to media, the people said Iraq’s Oil Marketing Company (SOMO) has boosted Basra crude forward export sales to Unipec by 3 percent to a total of 40 million-60 million barrels each quarter — 435,000-652,000 bpd — for 2017.
“If Iraq increases its sales to China while others have to cut back or just hold their volumes steady, Iraq will inevitably gain market share in what is arguably the most important oil market,” said a trader who specializes in sending crude to China but is not allowed to speak publicly.
Unipec said it does not comment on specific deals. SOMO will also supply Basra Heavy crude under new term contracts to Exxon Mobil, Chevron Corp. and Indian refiner Essar Oil for 2017, according to a person close to the matter and a preliminary January loading schedule for the oil.
The contracts contribute to an expected jump in Basra exports to 3.53 million bpd in January 2017, the highest volume since June, the loading schedule showed. SOMO did not reply to an e-mail from Reuters seeking comment. Exxon and Chevron said they do not comment on operational matters, and Essar declined to comment.
In India, crude imports from Iraq rose 24 percent in the first 10 months this year to 784,000 bpd, making Iraq the second-largest crude supplier after Saudi Arabia.
Iraqi crude exports to the United States have more than doubled in the first nine months of 2016 from the same period a year ago to nearly 350,000 bpd as Venezuelan supplies declined, data from the Energy Information Administration showed.