SINGAPORE (Reuters) - Taiwan is increasing oil imports from northern Iraq as local refiners take advantage of an open arbitrage to buy high-sulfur crude that can replace supplies cut by OPEC.
State-owned CPC Corp bought 1 million barrels of Kurdish KBT crude for the first time in the second quarter, and Formosa Petrochemical Corp has resumed purchases of this grade after a near nine-month break, company officials said.
The oil tanker Kriti Sfakia loaded 1 million barrels of the crude at Ceyhan, Turkey, in mid-March that will arrive at Formosa’s refinery in April, trade flow data on Thomson Reuters Eikon showed. Formosa will receive more cargoes in the following months, officials said.
“Kurdish? Yes, we bought quite a lot,” Formosa Petrochemical spokesman KY Lin told Reuters.
Kurdish KBT oil has replaced some of the reduced supplies of medium and heavy crude from the Middle East after the Organization of the Petroleum Exporting Countries cut production, he said.
“The biggest impact (from the OPEC cuts) was that EFS (Exchange of Futures for Swaps) narrowed,” he said, referring to the price spread between Middle East Dubai and Europe’s Brent.
“With a narrow EFS, crude can be sent eastwards.”
CPC bought the crude because it was competitively priced, said a company spokesman, adding that it had not been affected by the OPEC cuts.
Kurdish KBT crude has an API gravity of 32 to 32.5 degrees and 2.5 percent to 3 percent sulfur, the CPC and Formosa officials said.
Comparatively, Kirkuk, another northern Iraqi grade, has an API gravity of 34.2 degrees and a sulfur content of 2.24 percent, according to BP’s website.
A Kurdistan government official said in December that it sees no major impact on its crude oil production from OPEC’s output cuts.
Most of the Kurdish KBT oil exports to Asia are masked as other grades to avoid recriminations from Baghdad which is locked in a dispute with the semi-autonomous region of Kurdistan over oil revenue split.
Kurdistan recently increased the loans guaranteed by future oil sales to $3 billion in new deals with trading houses and Russian state oil firm Rosneft aimed at strengthening its fiscal position as the region fights Islamic State.
Reporting by Florence Tan; Editing by Subhranshu Sahu and Christian Schmollinger