BAGHDAD: China’s crude imports from Iraq C-IMP-IQCN-MTH rose in the first ten months of the year by nearly a quarter to 23.49 million tons (566,387 barrels per day), compared with the same period of 2014.
This year, Iraq was unable to deliver full contractual supply due to technical and security problems: Chinese buyers signed deals to double Iraqi crude imports in 2014 but Iraq only managed to supply a quarter more.
Chinese oil firms will keep the amount of crude they buy from Iraq unchanged in 2015 for the first time in almost a decade, as the need for imports falls and concerns over the quality of the oil persist, five sources with knowledge of the situation said.
The varying quality of Basra Light, Iraq’s key export grade, has been a concern for buyers, while demand growth in China has also been slowing allowing oil firms to cherry pick purchases from global suppliers.
Oil prices have fallen more than 40 percent since June as a supply glut clashes with cooling demand, putting producers under pressure as consumers have more choice at lower costs.
“There is a lot of competition to supply,” IHS consultant Victor Shum said. “China has a lot to choose from.”
In contrast, China imported just 1 million tonnes of oil from Iraq in 2006. Iraq will give a higher discount for heavy crudes it exports from its port of Basra over quality issues, sources have previously said.
Another factor behind slowing demand for Iraqi oil is that China’s own import needs are not rising as fast.
China’s crude imports are expected to post a rise of 400,000 barrels per day in 2015, compared with 500,000 bpd this year.
“Regarding crude imports, it will be a function of SPR (strategic petroleum reserves) and commercial inventory fills,” Sen said, rather than one of meeting direct consumer demand.
The actual amount of crude Iraq delivers to China next year may also be determined by factors outside the order book.
Despite this, China is expected to increase crude imports from the world’s fastest-growing oil exporter in the long run.
