Iraq Fuel Oil Exports Set for Record Year Following October Surge

Iraq is making headlines in the global oil market as its fuel oil exports are set to reach record levels this year. This surge comes after a significant increase in shipments during October, driven by a decrease in domestic demand and a rise in production. As the second-largest producer in OPEC, Iraq's ability to boost its fuel oil exports is crucial for its economy, especially in light of the production caps imposed by OPEC+.

In October, Iraq exported over 2.15 million metric tons of fuel oil, marking the highest monthly volume ever recorded. This impressive figure is part of a broader trend that could see Iraq's annual fuel oil exports exceed 18 million metric tons in 2024, surpassing last year's record of more than 14 million tons. The increase in exports is expected to provide a much-needed boost to Iraq's oil revenues, even as crude shipments remain stagnant due to OPEC+ quotas.

The type of fuel oil that Iraq exports is primarily high-sulphur and straight-run, which can be refined into more valuable products like diesel. Most of this fuel oil has been shipped to markets in Singapore and India, highlighting Iraq's growing role in the global energy supply chain. The state refiner, SOMO, has not commented on these developments, but industry experts are optimistic about the future.

According to analysts, the decline in domestic demand, which fell by about 100,000 barrels per day in October, has made it economically advantageous for Iraq to increase its fuel oil exports. The refining margins for high-sulphur fuel oil in Asia have also improved, reaching discounts of nearly $2 a barrel at the end of October, the narrowest in over two years. This trend is expected to continue as more supply from various regions, including the Middle East and the West, is anticipated.

The reopening of Iraq's Karbala refinery, which has a production capacity of 140,000 barrels per day, has further supported the increase in fuel oil exports. Analysts believe that the future of Iraqi exports will depend on whether the refinery can operate its secondary units at full capacity. Iraq has been adjusting its crude exports to comply with OPEC+ quotas, which has led to an increase in the processing of crude into refined products.

Looking ahead, experts predict that Iraqi fuel oil exports will remain above 2 million tons in November. However, as winter approaches, there may be a tapering off of volumes as Iraq begins stockpiling for heating demand. This seasonal shift is something to watch closely, as it could impact both local and global markets.

Iraq's fuel oil export strategy appears to be paying off, positioning the country for a record year. As global demand for energy continues to evolve, Iraq's ability to adapt and increase its exports will be vital for its economic stability. The developments in Iraq's oil sector not only affect the country's economy but also have significant implications for global oil prices and supply chains. Keeping an eye on these trends will be essential for understanding the future landscape of the energy market.