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UK Trade Authority Probes Steel Import Quotas

UK Trade Authority Probes Steel Import Quotas

The UK's Trade Remedies Authority…

Iraq’s Plan To Change Oil Pricing For Asia Faces Resistance

Buyers do not support Iraq’s plan to change the way it prices its Basra crude for the Asian markets, because longer lead times between pricing and delivery would make it more difficult to hedge against price changes, Reuters reported on Friday, citing sources and market analysts.  

In a bid to increase oil revenues and possibly setting the stage for its own benchmark crude grade, Iraq told customers earlier this week that it might change the way it prices Basra crude for the Asian market. According to a letter by Iraq’s state oil marketing company SOMO, seen by Reuters, the company is asking customers for input by August 31 regarding the 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.

The Iraqi plan was 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. 

Iraq’s new pricing method would use the monthly average of DME Oman futures two months before the loadings, which means that if a loading is scheduled for October, it would use the August futures contracts. Buyers would know only in the middle of September if they had successfully bid for the cargo, which would leave them little time to hedge against price changes.

Other Middle Eastern exporters, including Saudi Arabia, price the crudes based on the loading month.

According to traders who spoke to Reuters, the lag time in pricing and loading would also make it difficult to compare the prices of crude grades.

Related: Kurdish Independence Could Deal A Major Blow To Oil Markets

Commodity analysts see the plan as a very significant change in pricing—and one that will be closely watched—but which they described as “very ambitious” and very hard technically to implement.

“Moving right away to DME Oman is very ambitious. I think it will cause a few hiccups because technically it’s going to be very hard,” Adi Imsirovic of Britain’s Surrey University Energy Economics Centre, told Reuters.  

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By Tsvetana Paraskova for Oilprice.com

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