Vitol has become the second largest buyer of Iraqi oil after ADNOC by purchasing at least 25 million barrels of Iraqi crude oil for loading in September. This move was prompted by the significant discounts that Baghdad has offered for transporting its oil through the Strait of Hormuz.
Offered Discounts
Iraq, through SOMO, has offered September crude oil with discounts ranging from $15 to $20.80 per barrel compared to its official prices. Trade sources have reported that some shipments have been sold at even greater discounts. These discounts help Iraq meet its urgent need for oil transportation, especially since the country does not have a large tanker fleet and exports most of its oil from southern terminals in the Persian Gulf.
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State of Iraqi Oil Exports
The flow of tankers through the Strait of Hormuz is significantly lower than pre-war levels, and transportation costs have increased due to rising expenses. Vitol has purchased between 25 and 30 million barrels of crude oil for loading in September, and ADNOC has also agreed to purchase another 40 million barrels for September. In August, ADNOC accounted for about 32 million barrels from Iraq and ultimately lifted about 20 million barrels.
These buyers have the logistical capabilities that Iraq desperately needs. ADNOC transports oil from within the Strait of Hormuz for resale through the Fujairah and Sohar terminals, and Vitol operates one of the largest oil trading and transportation networks in the world. Iraqi oil exports from southern ports averaged 2.35 million barrels per day in August and increased to about 2.6 million barrels per day in September.
Iran has also started allowing some tankers carrying Iraqi crude oil to pass through the Strait of Hormuz since Baghdad's requests in August. Iraq is trying to create another route for its oil exports and earlier this month began transporting southern crude oil towards Kirkuk for export through the Turkish port of Ceyhan. This trial only moved about 38,000 barrels in two days using 209 tankers, while flows through the northern route were close to 200,000 barrels per day.
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