European refiners find themselves grappling with soaring prices for denser barrels of crude oil from West Asia, according to a Bloomberg report. The surge in prices for cargo being shipped next month is causing significant challenges for the region’s energy industry.
Iraq, a major oil producer, has set the official selling price of Basrah Medium crude at the highest level in over a year for June. The situation has intensified after Saudi Arabia’s decision to raise the price of heavier oil for Europe. Surprisingly, for Asia, West Asian oil producers have either maintained stable costs or even slashed them for June, Bloomberg reported.
European refiners have faced difficulties in procuring crude oil ever since the West imposed sanctions on Russian shipments.
The flow of oil from Russia — The eastern European nation has been European Union’s top supplier — has considerably declined since 2022, coinciding with a loss of barrels from the Mediterranean port of Ceyhan. This has exacerbated the strain on European refiners.
Adding to the turmoil, exports of Kurdish crude from northern Iraq have stopped since late March due to an ongoing payment dispute between Iraq and Turkey. The lack of resolution to this dispute prevents nearly half a million barrels a day of oil, comparable to Russia’s, from being shipped through Turkey.
The absence of Kurdish crude in the market further tightens the supply and demand dynamics, forcing European refiners to explore other options and pay a premium for denser Middle Eastern barrels, according to Bloomberg.
It is worth noting that crude oils such as Russian Urals and Iraq’s Basrah Medium typically yield more oil products such as diesel and fuel oil. However, these varieties are generally offered at discounted prices compared to other types due to their higher sulfur levels.
The competition for Basrah Medium crude has intensified in Europe over the past month. According to reports, approximately 23 million barrels of Iraqi crude are expected to be imported into the region this month, a significant increase from the 16 million barrels recorded in April. The growing demand for Basrah Medium crude and supply constraints have pushed prices to their highest levels.
European refiners are now faced with the challenge of balancing their energy needs while managing the escalating costs of crude oil. The industry is closely monitoring developments in the payment dispute between Iraq and Turkey, as a resolution could alleviate some of the supply pressure on the market.
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