Iraq Offers Crude Oil Collection Outside Persian Gulf to Bypass Strait of Hormuz Disruptions

Iraq has offered buyers of its crude oil the option to collect supplies from outside the Persian Gulf for the first time since the Iran war began, according to a Bloomberg report, underlining that exports continue to flow through the Strait of Hormuz despite months of conflict-driven disruption.

Iraq's state oil marketer, SOMO, is offering Basrah Medium and Basrah Heavy crude that can be picked up via ship-to-ship transfer near the Omani coast next month, through a tender, Bloomberg reported, citing a document it had seen.

According to Reuters, the tender closes on August 28 and marks SOMO's second crude tender in a week, following an August 25 offer that had required buyers to send tankers through Hormuz to load directly at Iraq's Basra terminal.

The shift is notable because Iraq had, until now, been offering steep discounts to entice traders and refiners to load oil deep within the Gulf after the war began. Reuters had earlier reported that SOMO offered discounts of $25-$27 a barrel for Basrah Medium and $27.80-$29.80 a barrel for Basrah Heavy crude to encourage buyers to keep lifting cargoes from inside the Strait.

Iraq's Oil Ministry spokesman Salim Al-Rikabi told Bloomberg that the country has "an agreement with companies to transport Iraqi crude oil through secure routes for sale outside the strait, with the aim of achieving the highest possible economic benefit for the government."

Several trading firms have helped move Iraqi barrels to global buyers through the war, including Vitol Group and TotalEnergies SE, Bloomberg reported. TotalEnergies CEO Patrick Pouyanne said this week that the French major was among the largest traders of Iraqi crude.

Iraq's southern crude exports have been sharply hit by the Hormuz disruption, according to Argus Media, which tracks the market. Shipments averaged about 1.4 million barrels per day in July, up from roughly 500,000 bpd in June and 100,000 bpd in May, but still well below the pre-disruption Basrah export levels of over 3.3 million bpd.

Tankers have often been transiting the strait with transponders switched off to avoid detection, Bloomberg noted, and robust shipments have helped keep global oil prices in check even as the threat of attack in the waterway persists.

SOMO separately offered fuel oil in a tender last week that allows pickup either inside or outside the Persian Gulf.