Iraq's Oil Ministry confirmed recently that the country exported more than 106 million barrels of crude oil in October, with revenues having surpassed six billion USD. The results by IHS Markit Commodities at Sea for October shipments from Iraq suggest a very similar story, with total volumes having remained marginally below 3.5 million b/d last month. There is a very interesting story for users of our tool, as the Middle Eastern producer seems to have shipped much more than it usually does to major importers such as China and India. After the attacks in Saudi Arabia and the increasing concern around the time it would take for the country to recover its production, other producers across the Middle Eastern Gulf became much more popular. Iraq seems to have quickly stepped in and sold crude oil to China and India since late September, with the State Organization for Marketing of Oil of Iraq adding that the average selling price for crude oil in October reached USD 57.15 per barrel.

The market share of VLCC remained strong in October, with more than 70% of volumes shipped last month loaded on large tankers, while the share of Suezmaxes declined sharply month-on-month. Charterers considered loading on Aframaxes instead of Suezmaxes due to the increasing rates, in parallel to the rally observed in the market after the US imposed sanctions on the COSCO fleet. Meanwhile, some operators of Suezmaxes targeted other markets, such as West Africa, providing more space for Aframaxes to step in and further strengthen the trend developing.

Focusing on production, Iraq has been producing below its capacity of almost five million b/d, following the production cut agreement between OPEC and ten non-OPEC producers. These cuts have already lasted much longer than earlier anticipated, in an effort to support oil prices during a period of oversupply, primarily due to the rapidly increasing production in the US. However, Iraq seems to have been one of the countries, together with Nigeria and Russia, which continue to pump marginally above their quota in October. Their persistent failure to comply could either motivate other members of the agreement to consider deeper production cuts ahead of the OPEC+ December meeting or risk the balances between participating countries. Iraq managed to reduce its output last month, falling to 4.68 million b/d, which was still above its commitment in the OPEC+ deal.

Meanwhile, the ongoing anti-government protest in Baghdad have affected operations at Umm Qasr, a port primarily used for the country's imports of grains and other foods, after protesters blocked its entrance. Nearby offshore platforms exporting crude oil have not been affected yet, but concern has been increasing about the impact to be suffered in the country's oil industry. Protesters have also tried to block roads leading to the Majnoon oilfield, preventing employees from getting there.

Posted 11 November 2019 by Fotios Katsoulas, Associate Director, Lead Analyst Tanker Shipping & Alternative Fuels, S&P Global Commodity Insights