Iraq offers steep crude oil discounts amid Hormuz shipping risks

Iraq's state oil marketer has offered discounts of up to $29.80 per barrel on August-loading Basrah crude to persuade buyers to continue lifting cargoes from export terminals inside the Strait of Hormuz, as security incidents and declining vessel traffic squeeze demand for Gulf oil.

Pricing Details

A document reviewed by Reuters Thomson Reuters Corporation ↗ 7.42% showed that the State Organization for Marketing of Oil (SOMO) invited its term buyers to nominate contractual volumes of Basrah Medium or Basrah Heavy crude on a free-on-board basis from the Basrah Oil Terminal and Iraq's single-point moorings. For Basrah Medium, SOMO offered discounts of $25 to $27 per barrel relative to destination benchmarks, depending on the loading window. For Basrah Heavy, discounts ranged from $27.80 to $29.80 per barrel.zawya+1

The August discounts represent a widening from July, when SOMO offered $14 to $16 per barrel off Basrah Medium and $16.80 to $18.80 off Basrah Heavy. In May, when the strait was under near-total blockade, discounts reached as high as $33.40 per barrel.english.aawsat+1

Shipping Under Pressure

The pricing incentives reflect a deteriorating security picture. The United Kingdom Maritime Trade Operations reported last week that a cargo vessel was struck by an "unknown projectile" approximately 20 nautical miles northeast of Al Khasab, Oman. Two days earlier, another tanker reported hearing an explosion nearby, though no damage was sustained.kurdistan24

Reuters reported that visible traffic through the strait declined over the weekend. The slowdown follows months of sporadic attacks on commercial vessels since Iran moved to restrict passage through the waterway in late February. Before the conflict began, more than 130 vessels transited the strait daily; by mid-July that figure had fallen to as few as 14 on some days, according to maritime data firm Kpler.nytimes+2

Geopolitical Backdrop

The discounts come against a backdrop of stalled diplomacy between Washington and Tehran. On Monday, President Donald Trump described ongoing contacts as a "last chance" for Iran to agree to a deal, while Iran's Foreign Ministry spokesman Esmail Baghaei denied that any negotiations were taking place or scheduled.reuters

The two sides signed a memorandum of understanding in June aimed at restoring normal shipping through the strait, but the agreement collapsed amid mutual recriminations over vessel attacks and differing interpretations of transit fees. The standoff has left Gulf oil exporters bearing growing financial costs to move their crude to market, with SOMO's escalating discounts serving as a barometer of the disruption's toll on Iraq — OPEC's second-largest producer.aljazeera+2