MOSCOW (Reuters) - Hungary has increased oil imports from Iraq’s Kurdistan region at the expense of Russian crude in a sign that Middle East producers could be gaining ground in a battle with Moscow for global market share, according to trading sources.
This would also be the first confirmation of large Kurdish oil shipments to Europe as autonomous Kurdistan is locked in a standoff with Baghdad over lucrative exports and faces repeated sabotage of the pipeline carrying crude to Turkey’s Ceyhan port.
Hungarian oil group MOL receives the bulk of its oil imports from Russia. But it has stepped up imports of oil from Kurdistan since the summer, the sources told Reuters without giving specific volumes, part of a wider increase in seaborne crude purchases for the country’s main refinery, Szazhalombatta.
“These are serious volumes, almost 40 percent of Szazhalombatta’s needs,” a trader said of total seaborne imports.
The sources said this would inevitably involve a reduction in imports of Russia’s Urals blend, which come via the Druzhba pipeline.
MOL declined to say if it was buying blends from Kurdistan. It confirmed, however, that it was increasing purchases of blends other than Urals, but added that Urals would remain the main blend for its refineries.
The firm said it planned to ship in 12-18 cargoes of oil from sea this year, up from eight in 2014 and three in 2013.
Global oil prices have more than halved since June last year. Top exporter Saudi Arabia has refused to cut production as it guards market share, saying higher-cost oil producers would ultimately reduce output and help the market to rebalance
But U.S. oil output has proved more resilient than expected and Russia has continued to increase production in the past few months, further worsening the global glut. And Iraqi production has been also growing, both in the north and south.
A displacement of Russian volumes from Hungary - Russia’s fourth-biggest oil export market, accounting for about a tenth of its pipeline oil exports to Europe - could illustrate how the supply glut is reshaping the global market.
Urals supplies to Hungary declined in January-August to 3.25 million tonnes from 3.7 million tonnes in the same period a year earlier.
Kurdistan ramped up independent oil exports in June, saying it had no other choice but to sell oil itself after Baghdad failed to allocate money to the region from its budget.
Baghdad has repeatedly described independent Kurdish sales as illegal and explained low budget allocations by saying Arbil was not transferring enough oil to state energy firm Somo.
Oil exports from northern Iraq rose in September to an average of 600,463 barrels per day (bpd), up by around 127,000 bpd from August, according to the Kurdistan region’s ministry of natural resources.
The destinations of those exports have so far been unclear, since little information has been disclosed given Somo’s repeated threat to take Kurdish oil buyers to court.
The trading sources also said that MOL had been using the JANAF utilized oil pipeline to bring in Kurdish imports from the Croatian port of Omisalj, displacing Urals in a conduit used to take the Russian blend from Hungary to Bosnia and Herzegovina.
“They get one to two cargoes a month. The pipeline from Croatia to the refinery is filled completely with Kirkuk,” one trader said.
Additional reporting by Dmitry Zhdannikov; Writing by Vladimir Soldatkin; Editing by Pravin Char
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