In a bid to increase oil revenues and possibly setting the stage for its own benchmark crude grade, Iraq has told customers it may change the way it prices Basra crude for the Asian market, Reuters reported on Monday, quoting a letter by Iraq’s state oil marketing company SOMO it had seen.
According to SOMO’s letter, the company is asking customers for input regarding a plan to change the Basra crude pricing for Asia to Dubai Mercantile Exchange (DME) Oman futures beginning next year, dropping the average of Oman and Dubai quotes by S&P Global Platts.
“In an effort to realize the intrinsic value of our crude exports to Asia as to be in alignment with the recent market perception, we are contemplating a change of the current pricing formula for the Asian market,” Reuters quoted SOMO’s letter as saying. The letter is dated August 20 and asks for feedback from customers by August 31.
If implemented, the change would concern the pricing of around 2 million bpd of Iraq’s exports to Asia, nearly two-thirds of the daily Iraqi exports from the southern port of Basra.
While it is planning a possible pricing change for Asia, Iraq is not expected to alter the pricing to Europe and the U.S. in which it uses the Dated Brent and the Argus Sour Crude Index (ASCI), respectively. Related: Qatar Aims To Ease Its Reliance On LNG Exports
The Iraqi plan is also seen as a breakaway move from the leading Middle Eastern exporter, Saudi Arabia, whose official selling prices (OSP)—using S&P price assessments for decades--are usually followed by the other main producers in the region.
Middle Eastern crude benchmarks currently don’t include Iraqi crude grades, and this could be one of the reasons for Iraq studying a change.
“The Iraqis probably want to get in on the game of being a benchmark grade,” a Singapore-based oil trader told Reuters.
By Tsvetana Paraskova for Oilprice.com
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