OPEC’s second-biggest oil producer, Iraq, has reduced its term supplies for 2021 to several major Indian refiners by 10-20 percent, industry sources told Reuters, some of them noting that the Iraqi move was totally unexpected.
Iraq has been the biggest laggard in the OPEC+ production deal, producing above its quota in the agreement and drawing criticism from OPEC’s de facto leader and largest producer, Saudi Arabia, last year.
In what looks like a move to try to fall in line with its commitment, Iraq is now said to be reducing term supplies of its Basrah grades for all of this year to India. Iraq is India’s single largest oil supplier, ahead of Saudi Arabia and the United Arab Emirates (UAE).
The cut from Iraq comes just as India’s fuel demand and oil imports are rebounding from the lows during the pandemic.
Crude oil imports in the world’s third-largest oil importer and consumer, India, surged in December 2020 to their highest in almost three years, while provisional data from India’s Petroleum Ministry showed that fuel demand in India posted its fourth consecutive monthly rise in December, to the highest since February 2020.
“We never expected Iraq to cut volumes. We may have to look for alternatives like tapping the spot markets,” a source at an Indian refiner told Reuters, noting that the Iraqi cut “is happening at a time when we are preparing to increase run rates as fuel demand is recovering.”
Indian Oil Corporation (IOC) increased crude oil throughput of its refineries to 100 percent in November 2020, as consumption of all petroleum products has almost reached pre-Covid levels, the country’s biggest refiner and fuel retailer said in December.
According to Reuters sources, Iraq has cut its supply to IOC by 10 percent to around 350,000 bpd for all Basrah crude grades.
Meanwhile, Iraq has pledged, yet again, that it would compensate this year for its lack of compliance with the OPEC+ pact last year.