TotalEnergies is making available Iraqi crude for purchase by Asian refiners, specifically targeting companies in China and India, as global and regional oil supplies experience a significant increase. Traders familiar with the matter revealed the French energy giant's efforts to market these barrels to a region now awash with more affordable Middle Eastern crude. This strategic move by TotalEnergies comes after the full reopening of the Strait of Hormuz, a critical passageway for oil shipments, which has unlocked a substantial volume of oil onto the market.
The surge in available crude is a direct consequence of an interim peace deal between the US and Iran. This agreement has allowed for increased oil flows through the Strait of Hormuz, prompting various Middle Eastern producers, including Saudi Arabia and Iraq, to boost their output. Consequently, Asian refiners have been inundated with offers for cheaper Middle Eastern oil, with some cargoes being priced at discounts of as much as $5 a barrel to Brent futures on a delivered basis to China. Independent refiners in China, such as Rongsheng Petrochemical and Shandong Chambroad Petrochemicals, have already capitalized on these lower prices, securing spot purchases of Saudi and Iraqi crude, respectively. TotalEnergies itself has a significant presence in Iraq, including a $10 billion investment plan to enhance oil, gas, and power output, and a $250 million project to capture gas from the Ratawi oil field.
The increased supply has created an abundance of crude in Asia, leading to an overhang. This situation has prompted some Asian refiners to consider offering cargoes to destinations as far afield as California and Hawaii, a highly unusual development given that Asia is typically the primary destination for Middle Eastern oil. While China has been a key buyer of cheaper Middle Eastern crude, overall imports of Iranian crude by China saw a reduction in June. Many refiners in Asia have already secured their crude supplies through at least the end of August, making them less inclined to commit to additional purchases, even of discounted Iranian crude, until payment channels are clarified and sanctions potentially lifted. State producers like Saudi Aramco and Abu Dhabi National Oil have also been offering their oil on more flexible terms to encourage sales in this competitive environment.
