Iraq Cuts Oil Prices for September Exports Amid Global Competition

Strategic Insights -

Iraq's State Oil Marketing Organization (Somo) has adjusted its pricing strategy for Basrah Light crude exports to remain competitive in the international market. In response to Saudi Arabia's recent price cuts, Somo has reduced term prices for US customers by $1 per barrel and for Asian customers by 55 cents, while increasing prices for European customers by 50 cents. This move aims to bring Basrah Light grades in line with rival medium-heavy, sour crude grades in international markets.

Key Takeaways:

  • Somo has cut term prices for its Basrah Light crude exports for September by $1 per barrel for US customers and by 55 cents for Asian customers.
  • Prices for European customers have been raised by 50 cents, while the new official selling prices bring Basrah Light grade in line with rival medium-heavy, sour crude grades in the international markets.
  • Basrah Light exports for September will be sold to US customers at a discount of $8.35/bbl to West Texas Intermediate (WTI), down from minus $7.35/bbl for August.
  • Asian lifters will pay a discount of $2.10/bbl to the average of the Oman/Dubai price, down from minus $1.55/bbl.
  • European customers will, however, get a discount of $6.75/bbl to Brent-Forties-Oseberg (BFO), up from minus $7.25/bbl.
  • Iraqi crude exports are expected to slip in August from July's high level of 1.6 million barrels per day, a top Iraqi oil official said.
  • July exports were exceptionally higher than exports for previous months, thanks to the resumption of Kirkuk crude loading.
  • Somo is hoping to raise exports to 1.7 million b/d by the end of 2005.
  • The Energy Intelligence's Basrah loading program for August indicates that some 27.7 million bbl, or 1.85 million b/d, are scheduled to be lifted in the first half of the month.

Statistics:

  • $1 per barrel reduction in term prices for US customers.
  • 55 cents reduction in term prices for Asian customers.
  • 50 cents increase in prices for European customers.
  • $8.35/bbl discount for US customers in September, down from minus $7.35/bbl for August.
  • $2.10/bbl discount for Asian lifters in September, down from minus $1.55/bbl.
  • $6.75/bbl discount for European customers in September, up from minus $7.25/bbl.
  • 1.6 million barrels per day in July exports.
  • 1.5 million b/d expected in August Basrah Light exports.
  • 27.7 million bbl scheduled to be lifted in the first half of August.
  • 1.85 million b/d scheduled to be lifted in the first half of August.

Sources:

  • "Iraq Deepens US Discount for Basrah Light" (Oil Daily, August 5, p8)
  • "Iraq's Basrah Light Exports to Slow in August" (Oil Daily, July 29, p7)