Asia's fuel oil imports from Iraq hit 4-month high in May
Asia's fuel oil imports from Iraq hit a four-month high in May as strong refining margins boosted output and exports from the Middle Eastern supplier, according to trade sources, analysts and data from shipping analytics firm Kpler.
The rise in exports from OPEC's second-largest producer helps boost its oil revenues as Baghdad is cutting crude oil shipments to deliver on its schedule of compensation cuts pledged to OPEC+.
Asia's fuel oil imports from Iraq totaled 910,000 tonnes (t) (about 186,400 bpd) in May, the highest since January and up over 40% from the previous month, Kpler data showed.
The jump in Iraqi exports comes after 380-cst high-sulfur fuel oil (HSFO) refining margins to Dubai crude reached record-high premiums last month.
The cargoes were shipped to Singapore to be blended into the bunker fuel pool as demand for HSFO as a feedstock at Asian refineries is weak, a Singapore-based fuel oil trader said.
Iraq's fuel oil is mainly high in sulfur and can be processed into better-value products by refiners, or blended by traders into marine fuel to be supplied to ships. Exports of Iraqi fuel oil have climbed in recent years, hitting a fresh annual high last year.
The supply influx has weighed on Singapore HSFO bunker prices in recent months and crimped profits for bunker sellers, with ex-wharf 380-cst spot bunker differentials falling to discounts against fuel oil quotes, trade sources said.
Bunker fuel sold on an ex-wharf basis means the seller has to transport the fuel to the wharf, which is the dock or terminal for loading and unloading the cargo.
However, Iraqi shipments are expected to dip in the coming months as refiners' margins for producing high-sulfur fuel oil (HSFO) have retreated from all-time highs, while domestic demand for power generation in Iraq will rise in summer, traders and analysts said.
"If the economics become less favorable, export volumes are expected to decline," said Palash Jain, Middle East oil market consultant at FGE.
Iraq is expected to burn more liquid fuels for power in the upcoming summer months versus last year, he added.
Refiner margins for HSFO have retreated nearer to parity from crude quotes this week, based on LSEG data for prompt-month contracts.
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