Iraq's state oil marketer SOMO is offering last-minute Brent crude cargoes to buyers after some trading companies backed out of loadings, according to people with direct knowledge of the matter. Soaring freight rates from the Persian Gulf are complicating deliveries and could add upward pressure on prices already above $100 a barrel at loading.
SOMO has approached at least two companies with late-September crude offers, people familiar with the matter said, after some traders pulled out of scheduled liftings. If Iraq cannot find buyers or vessels for the extra barrels, the disruption could push crude prices higher at a time when freight costs are already surging and global markets are severely disrupted.
Shipping costs eat into crude value
Moving oil on very large crude carriers from the Gulf of Oman to East Asia now adds about $20 to the price of a barrel, according to Bloomberg calculations based on Baltic Exchange data. That is roughly a fifth of the value of crude now priced above $100 a barrel at loading, compared with only a fraction of the delivered cost before the war.
Iraq sits farther from the Strait of Hormuz than some of its Gulf neighbors, so it depends more heavily on trading companies to market and move its crude. As a result, Baghdad has offered steep discounts on its Basrah Medium and Heavy grades in recent tenders to keep buyers interested.
Competition among Gulf sellers leaves barrels unlifted
Competition among Gulf nations to sell their oil has meant some companies that previously lifted Iraqi crude turned to rivals offering deeper discounts instead, SOMO chief Ali Nizar said on Sept. 20, according to a video posted on the Iraqi parliament's official YouTube channel. That shift left some Iraqi supply unloaded. Nizar did not immediately respond to a request for comment sent outside working hours.
It was not immediately clear which traders had pulled out of loadings, freeing up the extra crude. Vitol Group, Trafigura Group, TotalEnergies SE and Abu Dhabi National Oil Co. have previously handled Iraqi crude shipments through the Strait of Hormuz.
Source: Rigzone
Trading involves risk.
Risk Disclaimer
