Bloomberg: Iraq offers huge discounts on oil to those crossing the Strait of Hormuz economy

Bloomberg reported that Iraq is offering its long-term buyers significant discounts on the crude oil loaded this month, but oil tankers will be forced to cross the Strait of Hormuz to load barrels deep into the Arabian Gulf, at a time when tensions are escalating in the region.

Iraq, a member of OPEC, offers discounts on official prices of up to $33.40 per barrel for Basra Medium crude, which is its main crude, according to a statement issued by the State Oil Marketing Company (SOMO) reported by Bloomberg.

The statement is dated May 3, and specifies a range of price levels during different periods of this month.

The Strait of Hormuz has become almost closed since the war began at the end of February, while the escalation of confrontations yesterday, Monday, between the United States and Iran raised doubts about the possibility of reaching a four-week truce.

Limited exports

Iraq was one of the first producers in the region to begin cutting production early in the conflict, after excess storage capacity quickly filled up as exports from the Persian Gulf halted.

Last April, two ships loaded oil in the port of Basra in southern Iraq, compared to 12 ships in March, after empty ships were unable to enter the Arabian Gulf through the Strait of Hormuz, according to ship tracking data collected by Bloomberg.

Basra Port can usually load up to 80 tankers per month, and Iraq still exports crude oil through a pipeline that passes through Türkiye, but in small quantities compared to the quantities shipped.

If buyers accept SOMO’s May terms, “the force majeure clause will not apply to this offer, since it was issued under exceptional circumstances that exist and are known to all parties,” SOMO said.

Basra Medium crude loaded from May 1 to 10 is sold at a discount of $33.40 per barrel, shrinking to $26 during the remainder of the month, while Basra Heavy crude is offered at a discount of $30 from official prices.

In another context, SOMO offered Qayyarah crude through a spot tender last week, although the barrels also needed to be loaded deep into the Arabian Gulf, according to traders.