According to media reports citing multiple trade sources and a related document, Iraq's State Oil Marketing Organization (SOMO) is offering substantial discounts off its official selling prices to attract term contract buyers to lift Basrah crude oil from Middle Eastern Persian Gulf ports in July.
The discount for Basrah Medium crude is in the range of $14 to $16 per barrel, while the discount for Basrah Heavy crude is between $16.80 and $18.80 per barrel, with the specific amount depending on the loading period.
The largest discounts apply to cargoes loading from July 1st to 5th. Discounts for shipments loading from July 6th to 10th, and from July 11th to 31st, are progressively smaller.
SOMO has stated that buyers must declare their intended purchase volumes within one day of receiving the notification letter.
One trade source indicated that these significant price concessions are intended to compensate buyers for the high chartering costs associated with vessels needing to navigate the Strait of Hormuz to transport the oil.
Data shows that the daily time-charter rate for a Very Large Crude Carrier (VLCC), capable of carrying 2 million barrels of oil, for shipping crude from the Middle East to China has risen from around $220,000 before the U.S. and Israel launched strikes against Iran (on February 27th) to approximately $300,000. However, this rate has declined from its March peak of about $600,000.
Two other industry insiders noted that while the discounts on Basrah crude are substantial, buyers remain concerned about whether navigation through the Strait of Hormuz will proceed smoothly.
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