Iraq Notifies Buyers for Self-Pickup, Claims Crude Can Transit Hormuz
After a 97% drop in March exports, Iraqi crude oil finally sees a glimmer of "exemption"! The government has urgently notified Asian buyers to resume lifting from the Strait of Hormuz. However, the exemption details are vague, and buyers must directly face transit risks, leading to general caution and observation in the Asian market. There is an urgent need for Iraq to provide more security assurances. The full recovery of the Strait channel remains highly uncertain
Iraq has notified Asian buyers to pick up crude oil, stating that its oil has been exempted by Iran and can transit the Strait of Hormuz. However, buyers are generally cautious, and the scope of the exemption remains unclear.
The Iraq State Oil Marketing Organization (SOMO) issued a notice on Sunday, informing buyers that Iraqi oil shipments are now "exempt from any potential restrictions." It requested buyers to submit lifting plans, including vessel information and requested loading volumes, within 24 hours, emphasizing that all loading terminals, including Basra, are "operating normally." This marks the first sign of a restart for Iraqi crude oil exports after the Strait of Hormuz was effectively closed for about a month.
However, according to Bloomberg, several Asian buyers stated they are seeking further clarification, including whether the exemption applies to all Iraqi oil and whether Iraq will provide its own tankers to enhance transit security.
Ambiguous Exemption Details Raise Buyer Doubts
Iran announced last weekend that vessels from neighboring Iraq are permitted to use the Strait of Hormuz. However, the Iranian military spokesperson did not provide specific details about which tankers or cargoes are protected. On Sunday, the tanker Ocean Thunder, carrying 1 million barrels of Iraqi crude oil, completed its transit through the Strait, becoming the first actual case under the exemption arrangement.
According to Bloomberg, Asian buyers are cautious about this arrangement, demanding clear exemption conditions, especially concerning whether Iraq is willing to provide its own tankers for carriage to offer additional security assurances for transit. Iraqi crude oil is typically sold on a Free On Board (FOB) basis, meaning the buyer arranges transportation, requiring buyers to bear transit risks themselves.
Exports Plummet, Alternative Channels Limited
The effective closure of the Strait of Hormuz has severely impacted Iraqi oil exports. Data shows that Iraq's average daily crude oil exports plummeted by approximately 97% in March to about 99,000 barrels, a significant decrease from the previous month.
Iraq's alternative options for bypassing the Strait of Hormuz are extremely limited. Currently, only a pipeline system transiting through Turkey is available, which is insufficient to handle large-scale export demands. This makes the Strait exemption arrangement crucial for the recovery of Iraqi exports.
According to Bloomberg, tanker traffic in the Strait of Hormuz has seen some recovery in the past week, with the seven-day rolling average up to last Saturday reaching its highest level since the outbreak of the conflict. However, overall traffic remains a trickle compared to pre-war levels, and the market is closely watching whether the Strait channel can maintain stable and continuous opening.
