U.S. seen as Iraq's best oil customer despite bombings

U.S. seen as Iraq's best oil customer despite bombings

By Paul Thomasch

NEW YORK, Dec 17 (Reuters) - American bombs may be falling on Baghdad but U.S. oil companies on Thursday said they expect to remain the biggest buyer of Iraqi crude in the months ahead.

The U.S. over the past year was the biggest single buyer of Iraq's oil, accounting for nearly 40 percent of its exports under the United Nations humanitarian ``oil-for-food'' programme, according to U.N. data. U.S. Energy Department figures show Iraq was the fifth largest source of American oil imports in October, providing nearly 8 percent of U.S. foreign crude.

The reason U.S. companies have been such big buyers is simple: Iraqi crude is cheap. Despite the current hostilities, the U.S. refiners expect to keep buying.

``Our assumption is that exports are going to continue, and even if there is an interruption, it won't affect things until February,'' said an oil trader for one of the top three U.S. companies, echoing a view taken by much of the oil community on Thursday.

The largest American companies, such as Mobil Corp. (MOB.N), Exxon Corp. (XON.N), Chevron Corp. (CHV.N), and Valero Energy Corp. (VLO.N), all have been big buyers of Iraq's oil.

The record 650,000 barrels per day of Iraq oil imports in October was more than twice the level witnessed during the summer, and up from virtually none at the end of last year, according to preliminary figures from the Energy Department.

U.S. oil companies don't buy oil directly from Iraq, since they have been frozen out of contracts as punishment for Washington's hardline stance against Baghdad. They now buy it second-hand, primarily from a myriad of Russian trading companies, given contracts as a reward for Russia's support for an easing of sanctions against Iraq.

The U.S. concerns expect the oil to keep coming in as the U.N. works to ensure that, despite the military escalation, the humanitarian programme continues to provide revenue to buy food and medicine for ordinary Iraqis.

``My gut feeling is that the United Nations will do all that can be done to keep exports flowing,'' said another trader, who works for a large U.S. buyer of Iraqi oil.

However, traders said an unexpected halt in Iraq supply would send U.S. buyers scrambling to replace them and push up oil prices.

``All of the (Iraqi) barrels that are pulled off the market, and which have already been committed, will send traders scrambling to cover those requirements in the Mediterranean,'' said one trader.