Iraq is seeking to reduce the discounts it offers international buyers of its crude, aiming to lift revenues even as shipping through the Strait of Hormuz remains costly and risky. The discounts were introduced to encourage buyers to lift cargoes through the waterway, where security threats and attacks have sharply raised transport and insurance costs. With exports now recovering after months of disruption, Baghdad wants to renegotiate better terms.
Discounts have been steep. Iraq offered buyers $25 a barrel in August, then raised that to at least $34 a barrel to attract more shipments, according to Iraq’s Shafaq news agency. This comes while Brent crude has recently hovered above $100 a barrel.
Iraq’s oil ministry spokesman, Salim Al-Rikabi, said shipping and insurance fees for Hormuz transit have risen nearly tenfold. He explained that foreign oil companies are therefore bearing large costs, which is why discounts on crude loaded at Iraqi ports were necessary. The current policy, he said, is to negotiate the best possible discounts so that Iraqi oil prices, and revenues, stay high.
Iraq, which holds nearly 145 billion barrels of recoverable oil, is also expanding its own shipping capacity. Al-Rikabi said around 2 million barrels were moved last week on vessels operated by the state-owned Iraqi Oil Tankers Company, with efforts under way to carry more.
Export volumes have stabilised at around 2.7 million barrels per day, with roughly 2.4 million bpd shipped through Hormuz and the remainder via Turkey. Crude and petroleum product exports earned Iraq between $4.5 billion and $5 billion last month, according to Al-Rikabi. That is far above May, when exports fell to only about 200,000 bpd, but still well below the $7 billion to $8 billion monthly average Iraq earned last year.
The push for better pricing comes as Iraq faces a widening budget gap driven by essential spending needs and weaker oil income, making every dollar per barrel significant for public finances.
At DMX Associates, we are monitoring developments in Iraq’s oil exports, Gulf energy markets, and Strait of Hormuz shipping risks. Stay up to date via our website and LinkedIn page.
