Heavy Iraq crude has limited appeal for U.S. Gulf Coast buyers
By Liz Hampton and Marianna Parraga
HOUSTON (Reuters) - Sellers of a new grade of Iraqi oil are competing fiercely to win market share on the U.S. Gulf Coast, though high sulfur content has limited appeal for refiners of the crude, known as Basra Heavy.
Iraq's State Oil Marketing Organization (SOMO) began selling the crude with an API gravity of about 23 degrees in May after separating it from the Basra Light stream to resolve quality and consistency issues and reach new customers.
The first shipments of Basra Heavy to the U.S. Gulf Coast were modest. They peaked in October at nearly 2.5 million barrels, then plunged 80 percent in November. December arrivals have also been low, according to Reuters vessel tracking data.
Other volumes arrived since May on vessels carrying 11.7 million barrels of Basra Heavy and Basra Light in segregated hulls that went to refiners including Exxon Mobil (XOM.N: Quote), Chevron Corp. (CVX.N: Quote), Marathon Petroleum (MPC.N: Quote) and Valero Energy (VLO.N: Quote).
Shipments from these so-called co-loaded vessels also fell by half to 1 million barrels in November from October, according to tracking data.
Sales dropped off even though SOMO trimmed its Official Selling Price for Basra Heavy to the United States several times to win customers. Its discount to the sour crude index has grown to $6.25 a barrel from $3.90 in September. Traders estimate that Basra Heavy is aggressively priced several dollars below Western Canadian Select, a competing North American grade.
Introduction of Basra Heavy initially concerned suppliers of Latin American heavy grades seeking to guard their U.S. market share, traders and producers said. But those worries have waned.
A source at another U.S. refiner said his company bought a test cargo a couple of months ago, but made no additional purchases because of quality concerns about the grade whose sulfur content exceeds 4 percent. Continued...