Iraq Starts Offering Basrah Heavy Crude at Discounts for May

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Iraq established prices on Sunday for exports of Basrah Heavy oil, offering the crude at a discount to markets in Europe, Asia and the Americas.

The official selling price for Basrah Heavy to Asia for May was set at a $6.85-a-barrel discount versus Oman and Dubai benchmarks, according to state-owned Oil Marketing Co., known as SOMO. It’ll sell to Europe for an $8.45 discount versus North Sea Brent and to North America and South America at $1.40 a barrel below an index of sour crudes.

Iraq is offering Basrah Heavy after facing pressure from customers to split its Basrah Light crude into two grades to preserve quality. Selling the new, heavier stream should “repair buyers’ confidence” and help boost the value of the lighter grade, the Vienna-based consulting company JBC Energy GmbH said in a March 20 report.

“As production increases, the quality of their new production may be getting heavier from the past,” Victor Shum, a Singapore-based vice president at IHS Inc., said by phone on Monday. “So splitting that creates two streams that satisfies different customer needs.”

Basrah Light oil to Asia was set at a $2.80-a-barrel discount versus Oman and Dubai for May, unchanged from April. The grade was priced at $5 below Brent for Europe and 15 cents under the sour crude index to North America and South America.

Brent for May settlement added 10 cents to $57.97 a barrel on the London-based ICE Futures Europe exchange at 1:19 p.m. Singapore time.

Quality Complaints

SOMO was expected to implement separate crude pricing terms for the heavier Iraqi crude with API gravity of 24 degrees as early as this month and designate an existing single-point mooring facility to load the grade.

The move comes after complaints about the quality of Basrah Light, with about 1 million barrels a day missing from loadings in February, according to Switzerland-based consultancy Petromatrix GmbH. Iraq had requested foreign companies to reduce output at some of the heavier crude fields to maintain the gravity of Basrah crude.

Iraq exported about 2.4 million barrels a day of Basrah Light in April, down from 2.67 million barrels a day in March, according to data compiled by Bloomberg.

“Two streams give more consistent quality,” Shum said. “Refiners want reliable quality.”

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