Iraq's state-owned oil marketer Somo has received requests for additional crude supply as buyers seek alternatives to Russian volumes, according to a senior Iraqi official.
Some of the extra demand has come from buyers in Europe, China and India, the source said, adding that Iraq's limited crude export capacity would make it difficult to honour the requests. Somo-marketed crude exports rose by 3pc on the month to 3.32mn b/d in February, according to preliminary oil ministry data.
Some European buyers have shied away from buying Russian crude in recent days amid biting sanctions on Moscow over its invasion of Ukraine. Although sanctions are not targeting Russian oil directly, measures taken against Russian banks have created uncertainty about financing of trade. This, together with rising transportation costs in the Black Sea, has eroded demand for Russian crude.
Since the invasion, Russian producer Surgutneftegaz has repeatedly failed to award Urals cargoes in its typically well-attended sell tenders. The caution over taking Russian crude extends beyond European buyers. In a move to shelter itself from rising insurance and shipping costs, Indian refiner IOC added a note in its latest tenders saying it will only accept offers for crude loaded from Russian ports if it is sold on a delivered at place (dap) basis.
Replacing Russian crude will not be straightforward. UAE oil minister Suhail al-Mazrouei said before the attack on Ukraine that the Opec+ group would be unable to compensate if the crisis led to any disruption to Russian output. "I don't think anyone can substitute a prominent and large member of the group," al-Mazrouei said, adding that some members of the coalition have enough difficulty tackling decline because of underinvestment.
Yesterday Opec+ stuck to its roadmap and agreed a monthly quota increase of 400,000 b/d for April, resisting pressure for a bigger hike. Fatih Birol, executive director of the IEA, which is co-ordinating a 60mn bl release from strategic oil reserves from the US and elsewhere, described the decision as "disappointing".
Somo has yet to release its official crude formula prices for April, but some term clients nominate their monthly requirements ahead of the price release. Saudi Arabia's state-controlled Saudi Aramco is typically the first Mideast Gulf producer to circulate its formula prices, by the fifth of the month that precedes loading. Some trade sources expect Aramco to break away from its normal pattern of taking guidance from Russian Urals differentials for European formula prices, and to raise April prices for European customers because of the current shortage of sour crude options. Some market sources also expect European buyers to nominate the maximum Saudi volumes allowed under their contracts for April. Urals hit its widest ever discounts to Atlantic basin crude benchmark North Sea Dated this week.
