OPEC’s second-largest producer, Iraq, plans to export near-record volumes of Basra crude in September, up 20 percent from August, as it ramps up heavy oil production, trade sources said on Thursday.
“There were a number of wells shut-in before Basra Heavy came out to minimise the quality impact on Basra Light,” a source with knowledge of Iraqi oil production said. “Those are now being restarted.”
Iraq allocated 3.017 million barrels per day (bpd) of Basra crude for export in September, up from 2.52 million bpd in August, traders said, citing a preliminary loading programme from the State Oil Marketing Organization (SOMO).
Iraqi crude exports hit a record average of 3.064 million barrels per day (bpd) in July.
In August, the producer planned to cut exports to clear a backlog of ships waiting to load cargoes.
Of the September volume, 1.017 million bpd are Basra Heavy, up from 600,000 bpd in August, they said.
The jump in supply heightens challenges faced by Basra Heavy crude sellers as they prepare to put unsold oil this month into storage.
About 3 million barrels of Basra Heavy are expected to head into storage tanks at Fujairah in the United Arab Emirates due to lacklustre demand in Asia, traders said.
Few Asian refiners can buy 2 million barrels of the heavy oil in one shipment and the rise in the grade’s official selling price (OSP) in September makes it more challenging for sellers, they said.
“The market is going to be further depressed, especially as the OSP is higher,” a trader who deals with the grade said.
The grade has been sold at discounts to its OSP since its launch in June. Some discounts for August-loading cargoes were at more than $1 a barrel against its OSP, traders said.
Basra Light crude exports in September are at 2 million bpd, close to the 1.92 million bpd the previous month, they said.
The grade has consistently been sold at premiums to its OSP as its quality improved after Iraq split its southern crude production into two grades in June.