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United Nations

Iraq's Oil Exports Hang in the Balance

Strategic Insights

— 1 min read

Iraq and the UN were close to a pricing compromise last week, but obstacles remain, including a threat by Iraq to ban buyers from selling to the US. The surcharge issue, which triggered the stoppage, remains unresolved, and term customers are set to visit Baghdad in December to discuss volumes and attempt to solve the issue. The crisis has already led to a sharp price slide, and the US has indicated it will sell more crude from its strategic reserve if the stoppage persists.

Key Takeaways:

  • Iraq's oil exports are on hold due to a surcharge issue, which has triggered a stoppage in exports, despite progress on restoring exports.
  • The UN approved the 6 December start of oil-for-aid phase 9 and is likely to approve a new set of official prices for December.
  • Iraqi marketer Somo may relent on its request for a 50 [cts.]/bl payment or press for a one-to-one compromise with customers, but many buyers are hesitant to comply with sanctions.
  • The US has indicated it will sell more crude from its strategic reserve if the stoppage persists, and Iraq has threatened to ban customers from reselling its crude in the US.
  • The ban would apply to countries at war with Iraq, including the US and UK, and would potentially change trade patterns in Middle East crudes.
  • Iraq has 60mn bl of outstanding contracts under phase 8, which is equivalent to around four weeks' worth of exports.
  • The crisis has already led to a sharp price slide, and term buyers are keen on Iraqi crude due to the high premiums it fetches on the spot market.

Statistics:

  • Iraq's oil exports are currently around 2.1mn b/d.
  • The US takes a third of Iraq's oil exports, with around 750,000 b/d imported last September.
  • The largest US buyers are ExxonMobil (200,000 b/d), Premcor (145,000 b/d), and Chevron (130,000 b/d).
  • Up to 300,000 b/d of Basrah may be exported to Syria, which could be approved by the UN as a third outlet for Iraqi crude.
  • The cash component of 600mn [European Dollar] ($530mn) in phase 9 will help keep production steady and exports around 2.1mn b/d.

Sources:

  • A **report** from the International Energy Weekly - no date mentioned
  • A **dispatch** from the Arabian Gulf Monitor, 4 December, p3
  • A **dispatch** from the Arabian Gulf Monitor, 20 November, p5

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