Asian refiners fret over Iraq crude supply uncertainty

Mon Sep 2, 2013 6:27am EDT

* Port, field maintenance may affect Basra Light exports

* August exports hit 2.6 mln bpd despite initial allocation cut

* Preliminary loading data shows Sept exports at 1.8 mln bpd

By Florence Tan and Manash Goswami

SINGAPORE, Sept 2 (Reuters) - Asian refiners are grappling with supply uncertainty from Iraq as field and port maintenance and inadequate infrastructure prevent one of the world's fastest-growing exporters from providing steady shipments of oil.

Iraqi crude buyers, most of whom are in Asia, are caught in a bind as they cannot ignore a producer that has ramped up its output to become OPEC's second-biggest exporter. But Iraq has left refiners guessing about its barrels for a third straight month, prompting many to scurry after alternative grades.

The scramble could continue this month as refiners ramp up purchases and runs to meet winter demand for heating fuels, further lifting premiums already at multi-month highs for spot Middle Eastern cargoes into Asia.

Rising seasonal demand aside, refiners are also worried the crisis over Syria could engulf the region and disrupt supplies to markets already coping with losses from Libya.

"The overall supply situation for Gulf grades is tight this winter," said a source with a North Asian trading firm.

"Over and above Syria, which is keeping everybody worried, we have been having supply issues from Iraq. That is keeping the market supported."

Abu Dhabi's Murban crude surged to its highest spot premium in six years in mid-August as Asian refiners snapped up cargoes amid the supply worries, while October DME Oman's premium to Dubai swaps stayed at elevated levels of more than $2 for most of last month.

Although U.S. punitive action against Syria for a suspected chemical weapons attack no longer seems imminent, any military strike would renew worries over Middle Eastern supplies.

At the same time, no end is in sight to the worst disruption to Libya's oil industry since its 2011 civil war as armed groups, security guards and oil workers shut down pipelines and ports across the country.

CONFLICTING INFORMATION

Iraq's Basra Light crude gained increasing importance in Asia over the last 18 months as buyers switched to the oil to make up for cuts in purchases from fellow OPEC producer Iran due to tightening Western sanctions over Tehran's nuclear programme.

But conflicting information from Iraq on crude available for export has made it difficult for buyers to judge supplies. Asian refiners buy Middle Eastern oil two months ahead of loading as it takes at least a month for cargoes to reach the region.

Iraq's State Oil Marketing Organisation (SOMO) surprised Asian buyers with a cut of 10 million barrels for initial allocations for August, although actual shipments rose as traders negotiated for more supplies. According to numbers released on Sunday by the oil ministry, August exports averaged nearly 2.6 million barrels per day (bpd), more than 10 percent higher than those in July.

For September exports, announcements have also been mixed. An official from Iraq's South Oil Co. said field maintenance would cut shipments by up to 500,000 bpd, while an oil ministry spokesman later said exports would not be affected.

According to industry sources and preliminary loading data, September allocations were around 1.8 million bpd, but the volume may rise as SOMO has offered more supplies.

No Asian buyers took up SOMO's offer of an additional 1-million-barrel cargo for September loading, a trader with a Western firm said, adding that the barrels were likely to head to the U.S. or Europe instead.

Asian buyers had already completed September purchases and had no room to take additional crude, traders said.

Uncertainty also remains over allocations in October. Asian buyers are doubtful that SOMO can carry out port maintenance and upgrades without disrupting exports, and this could mean that work at the terminal gets delayed, traders said.

This puts some Basra Light sellers in a dilemma as they can only sell when SOMO confirms their allocation, which is usually 10 days after the close of the trading window.

October cargoes were traded during August, but Iraq's allocation won't be known until Sept. 10.

"There were a lot of enquiries for October cargoes but we can't sell until we get confirmation," a Basra Light seller said. (Editing by Tom Hogue)