Thu, Feb 20, 2014 - Page 15 News List

Russia, Iraq boost supplies, squeeze other oil suppliers

Reuters, SINGAPORE

Russia and Iraq are boosting crude shipments to a Chinese market where oil demand is growing at its slowest in more than 20 years, forcing rival suppliers to divert cargos elsewhere.

The redirected shipments from Latin America, Africa and some Middle Eastern producers that were originally expected to go to Chinese refineries will drag on benchmark prices this year, and state oil companies have already started cutting official selling prices in their search for buyers.

Russia’s Rosneft, backed by its government to push East Siberian oil to Asia, and Iraq, armed with big discounts and easy terms, have landed contracts that will raise their combined shipments nearly 50 percent more than China’s import demand is forecast to grow this year.

With state refiner PetroChina (中石油) and oil major BP PLC also delaying or dropping refinery projects in China due to worries about demand growth, sellers will be scrambling for shares in a market smaller than they had anticipated.

“Lots of people all around the world want to sell crude to Asia, and there may not be enough demand for everyone,” Andrew Reed at Energy Security Analysis Inc said.

China’s oil demand rose just 1.6 percent last year, its slowest pace since 1992. Its crude imports grew 4 percent, their slowest since at least 2007, according to Reuters data, and down from an increase of more than 17 percent in 2010.

Although top China oil company China National Petroleum Corp (中國石油天然氣) has said the nation’s crude imports would rise 7.1 percent this year, or about 370,000 barrels per day (bpd), the bumps in Russian and Iraqi supplies would more than match that increase.

Russia’s biggest oil producer Rosneft, which supplied more than 300,000bpd to China last year, will ship an additional 180,000bpd this year, with China-bound exports eventually to rise to more than 900,000bpd.

“It’s a logical move. Russia is simply trying to secure a long-term offtaker of its crude,” Reed said.

As Iraq pushes hard to raise its market share in China and Asia, it is set to become China’s second-largest crude supplier this year by increasing shipments by 68 percent to 882,000bpd.

Last year, Iraq passed Iran to become China’s fifth-largest supplier after cutting its official selling prices for its main crude Basra Light.

China’s increased imports from Russia and Iraq only intensifies the fight for Asian market share among other oil exporters.

Producers in Latin America and Africa are already offering steeper discounts to Asian buyers as import needs in their traditional US and European markets drop.

“As the Atlantic basin needs less and less oil, crude from Latin America, Africa and Russia will have to find a new home,” Jeff Brown of FG Energy said.

“Naturally they’re looking to Asia,” he said.

By the end of the first quarter, shipments of Latin American crude to China are likely to have fallen by 10 percent from a year earlier to around 504,300bpd, according to data compiled by Thomson Reuters. Compared with the first quarter of 2012, that volume would mark a fall of about 25 percent.

This story has been viewed 1205 times.
TOP top