Iraqi Kurdish crude hits all-time low against Dated

Values for Iraqi Kirkuk blend crude marketed by the Kurdistan Regional Government (KRG) are at record discounts to the North Sea Dated benchmark.

Argus' assessment for KRG Kirkuk currently stands at $11.50/bl below Dated, the widest discount since records began in 1999. The grade offers those European buyers now reluctant to take Russian oil a viable alternative to medium sour Urals, but Kirkuk's differential to the Dated benchmark has consistently fallen since February regardless.

Market participants say soaring refining margins for light and middle distillate products may be prompting an increased preference for sweet grades over sour, and this could be constraining appetite for Kirkuk and weighing on prices.

Italian refiner Saras is typically one of the largest buyers of KRG Kirkuk, with its 300,000 b/d Sarroch refinery accounting for 12pc of the grade's 398,000 b/d of exports in 2021. But no shipments have headed for Sarroch since March, according to Argus tracking data. The last shipment - a 1mn bl cargo aboard the Petalidi - departed the Turkish port of Ceyhan on 22 March. This could be partly maintenance-related as Sarroch underwent various work between February and April, crimping crude receipts in the first fourth months of the year.

At least one refiner in Europe appears to have taken advantage of KRG Kirkuk's widening discount. Shipments of the grade to Romania's Black Sea port of Midia have resumed after a six-month hiatus, likely destined for Rompetrol's 100,000 b/d refinery.

Price considerations aside, the customer base for KRG Kirkuk is limited because those purchasing the grade face the risk of being refused Basrah crude allocations by Iraq's federal oil marketer Somo. One market source suggested that a possible reason for the weakening prices is an Iraqi supreme court ruling in February that deemed the KRG's oil and gas law unconstitutional, declared all oil contracts signed by the KRG with foreign companies invalid, and gave the federal oil ministry oversight of crude production in the country's semi-autonomous Kurdistan region. The federal Iraqi government said earlier this month that it would implement the court ruling after talks with the KRG failed to reach a compromise.

By Kuganiga Kuganeswaran