Iraq Offers Deep Discounts to Buyers Brave Enough to Navigate Strait of Hormuz

Iraq's state oil marketer, SOMO, is offering significant discounts to potential buyers who are willing to take on the risk of transporting its crude through the Strait of Hormuz. According to a new report from Reuters, SOMO is seeking buyers to load up its Basrah Oil Terminal or single-point moorings and associated facilities. The company is offering discounts of up to $27 per barrel for Basrah Medium and almost $30 per barrel for Basrah Heavy, depending on the loading window.

Iraq's reliance on the Strait of Hormuz has exposed it to disruptions caused by the US-Iran war and attacks on commercial shipping. The country is OPEC's second-largest oil producer, but its exports are severely impacted by these disruptions. Iraq's oil production dropped to approximately 1.9 million barrels per day in June, down more than 50% from roughly 4.2 million barrels per day in February.

The proposed project to rebuild a long-dormant oil pipeline with Syria could provide an alternative route for Iraqi oil exports. The pipeline, which has a nameplate capacity of about 700,000 barrels per day, was damaged during the US-led invasion of Iraq in 2003 and has been out of service ever since.