* Increased exports intended to help maintain oil revenues
* March exports more than triple 2016 monthly average
* Refiners in Singapore, U.S. among end-users of the fuel
(Adds Singapore trader comment about refining high-quality fuel
By Roslan Khasawneh
DUBAI, May 3 Iraqi fuel oil exports have soared
since January despite a reduction in the country's crude
production in line with OPEC supply cuts, industry sources said,
in what could be a way to boost output of refined products and
maintain oil revenues.
Iraq on average exported between 80,000 and 160,000 tonnes
of fuel oil per month in 2016, data collected by Thomson Reuters
Oil Research showed.
But volumes sold to Asia have jumped this year, with Iraq's
global exports of fuel oil reaching more than 500,000 tonnes in
March alone, according to Reuters data.
The soaring exports of high-quality straight-run fuel oil
(SRFO) are an attempt to support revenues amid the OPEC cuts in
which Iraq reluctantly agreed to participate, saying it would
reduce crude output by 210,000 barrels per day (bpd).
Iraq has processed more crude through its refineries,
turning it into fuel oil for export, five industry sources with
knowledge of the matter said.
"The Iraqis have been processing more crude internally than
exporting it, hence there are more fuel oil exports," said one
Middle East-based industry source, speaking on condition of
anonymity as he was not authorised to talk to the media.
A manager at an Iraqi-headquartered energy trading company
said: "The Iraqis have been working on optimising fuel oil
exports ... in a move to compensate for the OPEC (crude) cuts."
Other Middle East trade sources said Iraq had been blending
the high-quality fuel oil it produces with either crude or
naphtha before exporting it.
The effect has been felt as far as Singapore, Asia's main
oil-trading and storage hub. Trade data compiled by Reuters
shows imports of Iraqi fuel oil at 0.94 million tonnes in the
first quarter of 2017, nearly double the 0.48 million tonnes
imported during the whole of 2016.
One characteristic of high-quality fuel oil is that it can
be used as crude which, according to traders, is what is
happening with Iraq’s supplies.
"This stuff (the fuel oil), it's going straight into
refineries," said one Singapore-based fuel oil trader, adding
that Shell's 500,000-bpd Pulau Bukom refinery in
Singapore had taken several cargoes of Iraqi fuel oil.
The fuel oil, like crude, is then refined into other
products such as jet fuel, gasoline or diesel.
Shell declined to comment on the details of its commercial
Traders said some of the high-grade fuel oil had also been
shipped to the United States.
Fuel oil is a byproduct of crude oil refining. High-quality
variants such as SRFO can be further refined into higher-value
gasoline and diesel, while lower-quality fuel oils are typically
used in large marine vessels and power plants.
Iraq's bulging fuel oil exports have contributed to a glut.
In Singapore, premiums on fuel oil prices came under pressure in
the first quarter as inventories hit a near eight-month high.
Likewise, fuel oil inventories in the
Amsterdam-Rotterdam-Antwerp hub soared to their highest since
records began in 1995 in the first quarter, as fewer shipments
were sent to Singapore's already burgeoning storage tanks.
(Additional reporting by Rania El Gamal; Editing by Henning
Gloystein and Dale Hudson)