By: OrePulse

Iraq's state oil marketer, the State Oil Marketing Organization (SOMO), has widened the discounts on its December official selling prices for crude sold to Asian refiners, a move that followed Saudi Aramco's own price revision for the same month.

SOMO set the December discount for Basrah Medium crude at $8.80 a barrel below the average of the Oman and Dubai benchmarks, and the discount for Basrah Heavy at $11.80 a barrel below that same benchmark. Both figures were contained in a pricing announcement made on November 9 and are wider than the discounts applied the previous month, meaning the two Basrah grades will sell more cheaply relative to the regional marker in December than they did in November.

The announcement came after Aramco, Saudi Arabia's state oil company, lowered its own December official selling price for Arab Light crude sold to Asia, cutting the discount by $2 a barrel to $6.50 a barrel below the benchmark. That is the narrowest discount Aramco has applied to its flagship Arab Light grade since May 2020. Aramco set the discounts for its Arab Medium and Arab Heavy grades at $8.00 and $9.35 a barrel, respectively, for December, both narrower than the discounts SOMO applied to the comparable Basrah Medium and Basrah Heavy grades.

Official selling prices are set each month by state oil marketers in the Gulf and are calculated as a premium or discount against a regional crude benchmark, typically the average of the Oman and Dubai prices. The prices determine what term customers, largely refiners in Asia, pay for contracted volumes of crude and are closely tracked across the oil market each month as the figures are released.

Basrah Medium and Basrah Heavy are the two main grades through which Iraq sells crude to Asian buyers, while Arab Light, Arab Medium and Arab Heavy are among the principal grades Aramco sells to the same region. December's discounts mean that, on paper, Basrah crude is now priced at a steeper discount to the regional benchmark than the comparable Saudi grades.

Iraq's overall crude shipments have also been climbing. October loadings reached roughly 3.5 million barrels per day, a jump from the 2.65 million barrels per day recorded the previous month, a rise the pricing report attributed in part to stronger flows through the Ceyhan terminal. SOMO did not immediately give a reason for the size of December's discounts, and the announcement did not include official selling prices for grades sold to destinations outside Asia.

Gulf crude exports more broadly, including volumes loaded at Yanbu and Fujairah, totaled about 16.6 million barrels per day in October, according to data from the analytics firm Kpler cited in the pricing report, a level the report said was close to a wider average of roughly 17 million barrels per day.