Iraq’s fuel oil exports are poised to achieve all time highs this year, driven by the country’s ramp up shipments in October. This surge comes as domestic demand eased and production rose, according to Reuters.

Exports of fuel oil are expected to exceed 18 million metric tons or approximately 380,000 barrels per day (bbl/d) in 2024, surpassing last year’s record of over 14 million tons, according to Kpler and LSEG.

In October alone, Iraq’s fuel oil exports surpassed 2.15 million metric tons, marking the highest monthly volume on record.

This was coupled with a seasonal decline in domestic demand of about 100,000 bbl/d from the previous month, said Palash Jain, Middle East oil market consultant at FGE.

“Given reduced domestic demand and higher HSFO (high-sulfur fuel oil) cracks, increasing fuel oil exports in October was economically advantageous for Iraq,” he said.

This rise in exports not only added to global oil supply but also eased high prices in Asia while reducing feedstock costs at refineries.

The refining margin for producing 380-cst high-sulfur fuel oil in Asia reached discounts of nearly $2 a barrel at the end of October, the narrowest margin in over two years. However, recent data indicates discounts have widened to more than $5.50 a ton as more supply replenishment from various regions, including the Middle East and the West, was expected, Reuters reported.

Output enhancements from the Karbala refinery, which has a capacity of 140,000 bbl/d, have also contributed to the increase in exports.

“Iraqi fuel oil exports are comfortably heading for a record this year following increased domestic production from the reopening of Karbala refinery,” said Roslan Khasawneh, senior oil analyst at Kpler.

Iraq has been curbing crude exports to compensate for overproduction under OPEC+ quotas, processing more crude into products at its refineries, said LSEG Oil Research.

“We believe that in order to remain compliant due to its crude over-production, Iraq has upped its products output,” said Emril Jamil, a senior oil analyst at LSEG.

He expects Iraqi fuel oil exports to remain above 2 million tons in November, while FGE’s Jain said volumes may taper off from October highs in the next couple of months when Iraq starts winter stockpiling to meet heating demand.