Prices for Basrah Heavy crude oil from Iraq have risen unexpectedly over the last week, upending industry analysts’ predictions of flagging interest in heavy sour grades ahead of the introduction of new marine fuel standards.
SOMO, Iraq’s state oil marketing concern, recently slashed spot prices for December shipments of Basrah Light, which yields large amounts of high-sulfur fuel oil (HSFO) when processed in simple refineries. It did so in the expectation that demand would be weak ahead of the debut of IMO 2020, the sulfur content ceiling that the International Marine Organization (IMO) will begin imposing on January 1, 2020.
Instead, Basrah Light has been commanding prices that are around $1.70-2.00 above the official rate, the highest gap reported since August. Chinese and South Korean refiners helped push the price up by seeking additional supplies, Bloomberg reported on November 26.
Vandana Hari, the founder of the Singapore-based consultancy Vanda Insights, said that these buyers had shown more interest in Basra Light because US sanctions have hindered sales of less heavy sour crude from Venezuela and Iran. She also speculated, though, that Asian refiners were motivated by fears of supply disruptions and a tightening market.