The Asian oil market, mainly Indian, Chinese and South Korean, is a boon for Iraq and its crude oil. In February, therefore, Iraq did not reduce volumes to the South Asian country, and more specifically to India. The country, which imports more than 80% of its crude, has already imported 50.2 million tons of Iraqi oil in 2020.
Focus on the role of Iraq in the supply of oil in Asia, and particularly in India, in this exceptional health period.
Asian oil market forces innovation for Iraq
India and China: 60% of Iraq’s Asian exports
The oil market is largely played out in India and China for Iraq. According to the director of the crude oil and gas marketing division of the Iraqi Oil Marketing Organization (SOMO), Ali Nazar Faeq Al-Shatari, the two countries account for “More than 60% of Iraq’s Asian exports.”
To strengthen its presence in Asia, SOMO is therefore considering building a warehouse for Iraqi oil directly in India, China or South Korea. The purpose of this operation is to facilitate access to crude oil in all conditions.
Due in part to poor weather conditions in the Persian Gulf, oil exports to the south are being affected. These are expected to reach about 2.8 mb/d in February, out of the 2.9 mb/d initially forecast by the Iraqi government.
A new cargo program
This would allow SOMO to test a new cargo program. Based on the Internet, it aims to sell one-time shipments of crude oil and petroleum products directly to businesses.
The timetable for the start of the system has not yet been set, as it is still in the testing phase. Technicians are currently working on the transparency and efficiency of spot cargo options for partner companies.
Indian consumption could well influence oil prices
India to import 50.2 million tons of Iraqi oil in 2020
Following the Covid-19 pandemic, domestic fuel prices in India have skyrocketed. The country was then heavily dependent on OPEC+ supply, which was reduced in May 2020. The group had announced a 9.7 Mb/d reduction in oil production as of May 1.
Today, India imports more than 80% of the crude it processes. It plans to resume energy imports from countries like Iran and Venezuela. This is to counter the high crude oil prices of some producers.
In recent years, the country has therefore seen its position as an importer of Iraqi oil change. OPEC’s second largest producer had a 25% market share of the country’s crude oil imports in 2020. Shipments actually increased by 9.4% to 50.17 million tons.
An agreement of the Asian countries
In the oil market, India holds a special place as the third largest consumer of oil in the world. As such, it can open a dialogue on its prices and partner with other market players.
According to an S&P Global Platts official:
“India can raise this issue in various forums like Quad, a plurilateral platform involving the United States, Japan, India and Australia. With border tension easing, New Delhi could also engage Beijing to have a common voice of the world’s four-five largest oil consumers. South Korea could also be an ally on this issue of common concern.”
If this happens, India could influence oil prices.