Iraq agrees to supply more heavy fuel oil to Lebanon in Aug

Iraq agreed to supply more heavy fuel oil to Lebanon this month, with the first shipment set to be loaded in Iraq on Aug. 26, state-run Iraqi News Agency reported, citing Lebanon's caretaker Energy Minister Walid Fayad.

The shipment will be increased to 125,000 metric tons from 100,000 metric tons previously, according to the Aug. 19 INA report. "We are also implementing an agreement for 'crude oil' exchange with Iraq to increase quantities, and Iraq has confirmed its commitment," Fayad said, according to INA.

Lebanon's state utility Electricité du Liban announced Aug. 17 that the Zahrani power plant had exhausted its fuel oil supply, causing widespread blackouts around the country. The country has long suffered rolling blackouts that have been made worse by the country's economic crisis since 2019. Reliant on imports paid for in US dollars, Lebanon has struggled to buy basic goods, including fuel oil, as its currency has lost around 90% of its value against the US dollar.

Previous swap deals with Iraq have involved complicated compensation mechanisms where Iraq provides Lebanon with fuel in exchange for services provided to Iraqi citizens. Lebanon's power stations cannot process the heavy Iraqi fuel, and Lebanon must sell Iraq's fuel to purchase fuel it can use. Iraq's fuel oil exports surged in July to 574,000 b/d, the highest since at least 2016, from 429,000 b/d in June, according to S&P Global Commodities at Sea data.

Platts, part of S&P Global Commodity Insights, assessed the 3.5% sulfur fuel oil FOB Mediterranean cargo at $437.50/metric ton on Aug. 19, up from $373/ton at the end of 2023.

Earlier on Aug. 19, INA carried a statement by Iraq's government spokesman stating that fuel shipments to Lebanon had been held up because of "logistical and technical issues" but that a new shipment would be loaded "in the upcoming days."

Algeria also offered to fill in with fuel supply, Algeria Press Service said on Aug. 18.

"The strategic issue during this crisis stems from our reliance on a single source. Diversifying sources is preferable," Lebanon's Fayad said, according to the Aug. 19 INA statement. "We have been ready to secure 'spot cargo' for some time."

Iraq's oil minister Hayan Abdul Ghani has promised to provide multiple sources of fuel to Lebanon, Lebanon's Fayad said, according to INA.