Iraq's State Organization for Marketing of Oil offered October contractual supplies with markdowns up to $37 per barrel compared with the applicable benchmark, according to a document seen by Bloomberg. The sheet, dated Sept. 29, applies to cargoes slated to load between Oct. 1 and Oct. 31. For this round, Basrah Medium was set at a $34.50 discount and Basrah Heavy at $37 under the reference price, which varies by destination.
The steeper cuts underline how Iraq has had a tougher time shipping crude during the Middle East war than some neighbors, in part because of its position farther from the Strait of Hormuz. Without a sizable national tanker fleet, Baghdad is using discounts to keep buyers lifting barrels through the Persian Gulf while vessel risks persist. Competition in the region is also biting. On Sept. 20, SOMO chief Ali Nizar said in a video posted to the Iraqi parliament's official YouTube channel that some companies that used to take Iraqi oil shifted to sellers offering deeper discounts.
In Asian markets, SOMO bases the pricing on a mean of Oman and Dubai grades. SOMO's discounts were under $30 per barrel in August and September. There was no reply from the company to a request for comment made outside normal business hours.
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Moving oil has gotten pricier as a shortage of available supertankers drives up freight, making some trades uneconomic even with discounts. Iraq's latest offer - deepening cuts from below $30 to as much as $37 - shows how sellers are trying to offset those logistics headaches to keep barrels moving. For anyone watching energy costs, it is a reminder that the price you see on crude is only part of the story, and transport risks and costs can sway what ultimately shows up in the market.
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