Iraq Eyeing Expanded Oil Trade in Asia, Amid Larger Market Trends

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The ongoing trade war between the U.S. and China is causing ripples throughout the oil trade, specifically as Iraq looks for ways to expand their relationship with Asian countries. If nothing else, the timing of Iraq’s decision to make strategic infrastructure upgrades is suspect — especially as these repairs and replacements to the aging oil framework are years overdue. Experts note that this move will reduce the overall Iraq oil exports from the area while the repairs take place. It’s expected that the Asia oil trade will be looking for ways to increase oil exports to Asia to make up for the reported shortfall caused by the shift. The possibility of building Iraq crude storage in South Korea and Japan will help cement the deepened partnership between the two regions. All this comes while China attempts to de-throne the dollar in the global market with their newly-introduced petro-yuan.

Futures in the News

China’s plan is to reduce dependency on the American dollar, primarily by introducing their own gold-baked futures contract used to price oil in yuan. Beijing’s attempt to manufacture a state-backed yet viable oil-pricing benchmark faces a long road of skepticism from global markets, as economic leaders have concerns regarding the state’s powerful control. While ambitious, the plan is plagued with challenges, including the fact that more than two-thirds of the world’s oil economy use dollars to price their crude.

Accelerated Building Plans

Iraqi leaders at SOMO hope their accelerated plans to build in Asian countries, such as South Korea and Japan, will widen the gap between China and America when it comes to crude oil. The trade agreements with Asian markets will allow SOMO to boost shipments to this region while maximizing profits. Companies are lined up waiting to take part in the lucrative build arrangement between Iraqi crude marketers and potential Asian storage facilities. Iraq is second only to Saudi Arabia in the production of crude oil in the region, shipping around 1.8 million barrels per day from the Basra port.

Unique Upgrade Strategy

At the same time that China is considering a play on the American dollar for crude pricing and Iraq oil marketing firms are looking to form new partnership with Asian countries, Iraq has determined that the time is ripe for some overdue upgrades and replacements to their crude infrastructure. The timeline to complete the repairs is unknown and the move will have an indeterminate impact on the overall crude level leaving the region. The shallow waters, general congestion of the area and aging structures have caused the area to operate below installed capacity for quite some time, a situation that will be remedied with the repairs.

While the overall impact of the global crude shifts remains to be seen, what is clear is that there are myriad opportunities for investors throughout the world to take advantage of this movement. See how Matrix Global is fundamentally transforming how energy companies transact through extensive experience in trading, logistics and commodity financing. Fill out our secure online contact form for more information, or download our company brochure.


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