Iraq has overtaken Saudi Arabia in the world’s fastest growing oil market as producers compete to keep their most important consumers.
Baghdad became the top crude supplier to India in the last three months. It delivered around a million barrels daily, covering almost a quarter of India’s needs in May. Iraqi share grew from an average 19% to 23% in the previous 120 days. Saudi Arabia’s deliveries, in turn, dropped 1% to 17%, according to Bloomberg.
The race between oil producers is getting more and more intense in huge markets like China and India as the OPEC members are taking measures to limit output to deal with a global glut.
India imports more than 80 percent of the crude oil, needed to sustain the country’s $2-trillion economy. It will most likely become the fastest-growing consumer in the next twenty years, the International Energy Agency predicts.
‘Saudis used to be the king when it comes to crude supply, but now it’s becoming a prince,’ Mr. Ramachandran says, a high-ranking official at India’s major state-owned refiner Bharat Petroleum Corp.
According to him, India will most likely stick with crude from Iraq in the future as refinery upgrades in the country continue. The upgrades are actually the reason Iraq managed to become number 1 supplier, after years of trailing behind Saudi Arabia. Thanks to the new upgrades, implemented in India in the last couple of years, the country’s plants can process crude with a higher sulfur content.
New-Delhi has additionally modernized its ports to secure a stable supply. Iraqi shipments previously weren’t as attractive because of their inconsistency and delays, caused by the lack of the required port infrastructure, Ramachandran says.
Since the main obstacles have been dealt with, Iraqi crude is getting more attractive. ‘It suits our refineries quite well’, says Hindustan Petroleum Corp. Chairman, Mukesh Kumar Surana. Another reason Iraq has managed to win the Indian market is ‘the very competitive pricing’.
The state refiner imports approximately 4 million tons of Iraqi grades every year. This is around the same amount the country buys from Saudis. Indian Oil Corp. (the biggest processor in India) plans to buy about 18 million tons of Iraqi oil in 2017, compared to 15.6 million last year. At the same time, Saudi imports will not change and will stay at 5.6 million tons.
The total amount of crude imports in India in April and May didn’t change and was 4.35 million barrels a day. Iraqi shipments dropped 11% last month from 1.14 million barrels a day in April, which was the highest in 2017.
As the OPEC closely monitors Iraq for compliance with the organization’s limitations, Baghdad exported almost 4 million barrels a day in May overall. This was the highest number this year, according to data, collected by Bloomberg.