Iraq ups its selling game on path to oils top tier

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Just two years into the oil expansion drive, which had been held back by decades of wars and sanctions, Iraq has vaulted past Iran to become OPEC's second-largest producer behind Saudi Arabia.

That growth has not been lost on Riyadh, and a reinvigorated Iraq has led to a new rivalry at the top of OPEC, according to officials at last week’s meeting of the producer group.

“This was bound to happen. Iraq has to sell more crude and get a bigger market share,” a Western oil company source said.

“And they want to understand how to do it in a practical way.”

Opportunities for Iraq and Saudi Arabia to sell more into Asia - particularly China - were created after Iran's exports plunged by more than 50 percent, or over 1 million bpd, due to international sanctions aimed at halting its nuclear program.

Chinese state refiner Sinopec will nearly double the amount of term crude it buys from Iraq next year to 270,000 bpd as it looks to replace oil from Iran, trade sources said.

But cuts by other refiners mean China’s total volume under one-year contracts with Iraq will rise by just 8.2 percent to 568,000 bpd next year. That still leaves Iraq some distance behind Saudi Arabia in terms of market share.

There are signs Baghdad may become more aggressive on pricing to the Far East - perhaps a concrete step it is delivering on officials’ pledges over pricing.

Despite an increasing supply, Basra Light has been more expensive for Asian buyers than a rival crude from Saudi Arabia, Arab Medium, prompting buyers to grumble.

For January 2013, however, Iraq chose to leave its Basra Light price to Asia unchanged, while Saudi Arabia increased the prices of its Arab Light, Medium and Heavy crude to customers in the East.
Concern about pricing is likely to linger nevertheless.

“It’s one thing to get the top people to say they want to fix it, but quite another to get the people who actually set the OSPs to fix it” an industry source said. “It looks like it won't happen overnight.”

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