Chinese Refiners Snap Up Iraqi Oil as Gulf Supply Routes Fracture
Chinese refiners are increasing purchases of Iraqi crude as disruptions at the Strait of Hormuz and in the Red Sea complicate traditional Gulf oil supplies to Asia.
Chinese refiners are buying Iraqi crude, with recent purchases of 8 million barrels of Basrah Heavy and Basrah Medium for prompt delivery, Bloomberg has reported, citing unnamed traders. Oil has continued flowing via the Strait of Hormuz—Iraq’s main export channel—despite the Iranian blockade, but the blockade has reduced these flows to a fraction of what they once were. For the week to August 17, Marine Traffic reported a total of 95 vessel crossings, down from 118 the previous week. Some tankers have found a way around that by turning off their transponders, which makes them undetectable for vessel-tracking systems.
However, that has not been enough to bring oil flows much closer to pre-war levels. On top of this, Saudi Arabia has had to divert its oil exports first from Hormuz to the Red Sea and then from the port of Yanbu to Egypt because of Yemeni Houthi attacks on its tankers and energy infrastructure. To avoid strikes on its tankers, the Saudis are shipping the crude north, via the Suez Canal, which has a much lower tanker capacity than Bab el-Mandeb.
Iraq, however, has managed to boost its exports via the Strait of Hormuz from earlier months. According to its state oil marketing company, the country has been exporting crude at a rate of 2 million barrels daily since the start of the month, Bloomberg noted in its report. The Iraqi crude should help Chinese refiners make up for some supply from Saudi Arabia that will be taking longer to reach its final destination in China because of the Red Sea and Bab el-Mandeb situation. Chinese refiners have also been buying Emirati crude. At a spot tender at the end of July, Chinese majors including Sinopec, PetroChina, and Sinochem bought some 2 million barrels of Upper Zakum, Reuters reported at the time.
ADNOC sold a total of 12 million barrels of crude at that tender. By Irina Slav for Oilprice.com
