Vitol has bought at least 25 million barrels of Iraqi crude for September loading, making the world’s largest independent oil trader Iraq’s second-biggest buyer behind ADNOC as Baghdad pays steep discounts to keep barrels moving through the Strait of Hormuz.
Iraq’s SOMO offered September crude at discounts of $15 to $20.80 per barrel to its official selling prices, according to a tender document reviewed by Reuters. Trading sources said some cargoes sold at even larger discounts.
The discount buys something Iraq badly needs right now: ships.
Iraq has no large tanker fleet of its own, and most of its crude leaves from southern terminals deep inside the Persian Gulf. Tanker traffic through Hormuz remains far below prewar levels, and freight costs have exploded as owners charge more to send vessels into the region.
Vitol purchased between 25 million and 30 million barrels of September-loading crude, according to Reuters sources. ADNOC agreed to buy another 40 million barrels for September after being allocated 32 million barrels in August, of which it ultimately lifted about 20 million.
Those buyers have the logistics Iraq lacks. ADNOC has been moving crude from inside Hormuz for resale through terminals at Fujairah and Sohar, and Vitol operates one of the largest oil trading and shipping networks in the world.
Iraqi exports from southern ports averaged 2.35 million barrels per day in August and have risen to about 2.6 million bpd so far in September. Iran also began allowing some tankers carrying Iraqi crude through Hormuz in August after requests from Baghdad.
Iraq is trying to build another way out. Earlier this month, it began trucking southern crude north toward Kirkuk for export through Turkey’s Ceyhan port. The trial moved only about 38,000 barrels over two days using 209 tanker trucks, while flows through the northern route were running near 200,000 bpd.
By Julianne Geiger for Oilprice.com
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