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United Nations

UN Sanctions Committee U-Turn to Impact Iraqi Oil Exports

Strategic Insights

— 1 min read

The United Nations Sanctions Committee has made a surprise decision to revise its oil-for-food deal, casting a shadow over Iraqi oil exports, which are expected to come to a halt for at least two weeks. The current deal is set to expire on November 25, and while Iraq's U.N. ambassador, Nizar Hamdoon, has requested a two-month extension, the committee is considering a fresh fifth phase instead. This development has sparked intense scrutiny over the margins being made on Iraqi crude oil exports, with U.N. circles expressing concern that prices may be inflated.

Key Takeaways:

  • The UN Sanctions Committee's decision to revise its oil-for-food deal is likely to impact Iraqi oil exports, which may be disrupted for at least two weeks.
  • The current deal is set to expire on November 25, with Iraq's U.N. ambassador, Nizar Hamdoon, requesting a two-month extension.
  • The Sanctions Committee is considering a fresh fifth phase, which would retain all elements of the current deal but allocate more funds for spare parts and repairs.
  • The U.N. investigation into the pricing of Iraqi barrels may lead to SOMO marking up its barrels considerably, potentially affecting earnings for lifter and resale of Iraqi crude oil.
  • The WTI contango structure has been favorable for traders, allowing them to make significant profits on the resale of Iraqi crude oil.

Statistics:

  • 1.9 million b/d: Current level of Iraqi oil exports.
  • $1.2 billion: Amount recommended to be made available for repairs and spare parts.
  • $300 million: Current allocation for Iraqi infrastructure.
  • $97.5 million: Total value of approved spare parts contracts as of November 16.
  • 139: Number of approved spare parts contracts.
  • 60 cents/bbl: Spread between second-month WTI and third-month WTI during the first half of November.
  • $13.40: February WTI marker price for Basrah Light exports.
  • $9.35: Priced cargo to customer for arrival 45 days later.
  • $4.05: U.N.-mandated discount for Basrah Light exports.
  • 65 cents: Profit per barrel made by traders on the resale of Iraqi crude oil.

Sources:

  • U.N. Sanctions Committee
  • Iraq's U.N. Ambassador, Nizar Hamdoon
  • UN Secretary-General Kofi Annan
  • State Oil Marketing Organization (SOMO)
  • U.N. Office of the Iraq Program
  • OPEC
  • Peg Mackey, Jareer Elass, Axel Busch

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