10/05/2021 | News release | Distributed by Public on 10/05/2021 11:51
Iraq's state-owned oil marketer Somo may not offer the Basrah Light grade to its term crude customers next year.
In a recent letter seen by Argus, the company asks buyers to nominate Basrah Medium, Basrah Heavy and Kirkuk blend for their 2022 allocations, and makes no reference to Basrah Light. Two direct clients and two other trade sources corroborated this information.
Basrah Light supplies will be earmarked for domestic consumption next year, while Basrah Medium and Heavy will be prioritised for export, according to an Iraqi source. Running more Basrah Light at Iraqi refineries will free up extra Basrah Medium and Heavy for export, although it is unclear if the entire Basrah Light stream will be used domestically. A market source said that 300,000 b/d could be blended into Basrah Medium.
Somo could yet change course before deciding 2022 allocations. If it proceeds, it will be removing Basrah Light from export markets just a year after splitting its two Basrah streams into three. Prior to January 2021, the company nominally exported a 34°API Basrah Light grade and a 26°API Basrah Heavy stream. The quality of both grades fell sharply below their on-paper specifications, leading to compensation reimbursements that eroded Somo's revenues.
As of the start of this year, Somo's offerings have included a 33˚API Basrah Light, a 29˚API Basrah Medium and a 24˚API Basrah Heavy. Basrah Light has since lost popularity among European refiners, with some traders pointing to its relatively unattractive official formula price.
The Basrah grades make up the bulk of Iraq's crude exports. Argus tracking data show 2.86mn b/d was shipped in the first half of the year, of which 1.01mn b/d was Basrah Light. These figures include Somo-marketed exports and supplies received by equity producers, which are repaid in crude for their investment in Iraq's upstream oil and gas sector.
Somo's term crude customers must state their requirements for 2022 by 30 October. The nominations will be evaluated, subject to Somo's crude availabilities and internal standards.
By Ruxandra Iordache