China accelerates purchases of Iraqi oil due to Gulf crisis
Chinese refineries are accelerating their purchases of Iraqi crude as disruptions to major Middle Eastern shipping routes disrupt supplies to Asia. In recent transactions, they acquired 8 million barrels of Basrah Heavy and Basrah Medium crude for immediate delivery.
Furthermore, the move allows China to cover some of its needs with Iraqi shipments while oil from other producers faces longer journeys and greater difficulties in reaching the Asian market.
Chinese refineries secure 8 million barrels of Iraqi oil
Specifically, the recent transactions include approximately 8 million barrels of Basrah Heavy and Basrah Medium crude. These varieties are part of Iraq's oil supply and allow Chinese refineries to expand their supply sources.
These purchases also come at a time when securing available shipments has become increasingly important for Asian buyers. Maritime difficulties in the Middle East have reduced the regularity of some routes connecting Gulf producers with China.
Therefore, Iraqi crude can cover a portion of the supply that takes longer to reach Chinese shores. The move also demonstrates how refineries are responding to a situation where the shipping route can be as important as the availability of oil.
The Strait of Hormuz continues to limit oil transport
Meanwhile, oil continues to flow through the Strait of Hormuz despite the Iranian blockade. However, transit remains well below pre-conflict levels.
During the week ending August 17, Marine Traffic recorded 95 vessel crossings , compared to 118 the previous week. The difference reflects the ongoing pressure on one of the main routes for transporting oil from the Gulf.
Meanwhile, some oil tankers have turned off their transponders during their voyages, a practice that makes them harder to detect using standard maritime tracking systems. Even so, these measures have not allowed for a return to pre-war traffic levels.
For Iraq, the Strait of Hormuz is of direct importance because it constitutes its main export route for oil destined for international markets. Maintaining this transit allows the country to continue placing part of its production in Asia.
Iraq increases its exports to 2 million barrels per day
Meanwhile, Iraq has managed to increase its oil exports through the Strait of Hormuz compared to previous months. Since the beginning of August, the country has exported crude at a rate of nearly 2 million barrels per day, according to data from its state-owned marketing company.
This ability to keep shipments in circulation favors the position of Iraqi oil compared to other Middle Eastern supplies that face greater logistical obstacles.
Consequently, China sees Iraq as a source capable of providing significant volumes at a time of uncertainty for regional maritime transport. The 8 million barrels recently acquired demonstrate the speed with which refineries are adjusting their purchases.
Saudi Arabia's problems open up space for Iraqi crude.
At the same time, Saudi Arabia has had to modify the routes used to transport some of its exports. First, it diverted shipments from Hormuz to the Red Sea. Then, attacks by the Houthis in Yemen against oil tankers and energy infrastructure increased the difficulties in that area.
In response, Saudi crude oil shipped from the port of Yanbu is being diverted to Egypt. The shipments are moving north through the Suez Canal to reduce the ships' exposure to attacks.
However, this alternative has limitations. The Suez Canal can accommodate smaller tankers than those that can navigate the Bab el-Mandeb Strait. Furthermore, the change in route increases the time required for certain Saudi cargoes to reach their final destination in China.
Thus, Iraqi oil is gaining ground as an alternative for Chinese refineries . The difference in transport times could influence purchasing decisions as long as disruptions to regional routes persist.
China is also seeking oil from the United Arab Emirates
In addition to Iraq, Chinese companies have also sought supplies in the United Arab Emirates. This strategy shows that buyers are spreading their purchases among various Gulf producers.
At the end of July, Sinopec, PetroChina, and Sinochem acquired approximately 2 million barrels of Upper Zakum crude oil during a spot tender. ADNOC sold a total of 12 million barrels of oil through this process.
Thus, China's oil purchases are being distributed among different available sources. Iraq now occupies a relevant position due to its ability to maintain exports while other routes face greater restrictions.
Gulf routes alter China's supply chain
Ultimately, the situation shows that supply to China depends as much on available production as on the capacity to transport it. Hormuz, the Red Sea, Bab el-Mandeb, and the Suez Canal are part of a maritime network under intense pressure.
As long as these difficulties persist, Chinese refineries will have incentives to seek shipments that reduce delays and allow them to maintain operations. In that scenario, Iraq could temporarily gain a share of Asian purchases if it maintains its export pace.
At the same time, increased Chinese purchases could alter the destination of some Middle Eastern shipments. This will depend on maritime traffic, vessel availability, and the ability of producers to maintain their oil exports to Asia.
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