Iraqi crude exports nearly double in August on Hormuz access, deep discounts

Iraq's crude oil exports jumped to around 2.34 million barrels per day in August, up from about 1.35 million bpd in July, as Iranian approval for Iraqi tankers to transit the Strait of Hormuz and steep price discounts drew a wave of buyers back to the market, according to Iraqi energy officials and shipping data.bairdmaritime+1

The recovery marks a turning point for OPEC's second-largest producer, whose exports had been severely curtailed since the near-closure of the Strait of Hormuz at the start of the Iran war on February 28. Provisional data from shiptracking firms Vortexa and Kpler pegged August exports at 2.3 million and 2.17 million bpd, respectively — up sharply from July but still well below February's pre-war level of roughly 3.4 to 3.7 million bpd.energy.economictimes.indiatimes+1

Discounts and Hormuz Transit Drive the Rebound

Tehran granted permission for a number of Iraqi oil tankers to pass through the Strait of Hormuz, Iran's state news agency IRNA reported last week, making Iraq the only Persian Gulf producer to have explicitly received such a permit. Iraqi state oil marketer SOMO offered August-loading cargoes from the Basrah terminal at discounts of $25 to $30 a barrel on a free-on-board basis, according to Reuters.bairdmaritime+1

"Iraq has been giving heavy discounts … which has incentivised buyers to find shipping options to get the cargoes out," Sparta Commodities senior analyst June Goh said. Traders could reap profits of about $10 a barrel after shipping and insurance costs estimated at around $17 a barrel, one trade source said.energy.economictimes.indiatimes+1

Major Buyers Move In

The discounts drew Chinese state majors PetroChina and Zhenhua Oil, along with TotalEnergies ↗ 0.21%, Vitol, Trafigura, Mercuria, and Cathay Petroleum. PetroChina loaded six million barrels from the Basrah terminal in July and August combined, a state oil trading executive with direct knowledge said. India's Reliance Industries received four million barrels of Basrah crude in August, Kpler data showed, and an official at Bharat Petroleum Corp said the company expects to receive its first Iraqi cargo of the fiscal year soon.bairdmaritime+1

September Outlook

Chinese refiners have bought at least 16 million barrels of Basrah crude for September arrival. Half were purchased by China's biggest independent refiner, Rongsheng Petrochemical, from Vitol and TotalEnergies at close to $10 a barrel above Dubai quotes for delivery to China. Another independent refiner, Shenghong Petrochemical, secured two million barrels for September delivery at around $8 a barrel over ICE Brent ↗ 1.02%​.energy.economictimes.indiatimes+1

Whether Tehran's transit permission will extend to all Iraqi cargoes remains unclear, but for now the combination of access and price is keeping buyers engaged.