Iraq's crude exports have recovered to around 3 million barrels per day as Baghdad uses steep price discounts to compensate buyers for elevated shipping, insurance and security risks around the Strait of Hormuz.
MONTREAL (Oil Monster): Iraq has restored crude oil exports to near pre-conflict levels as steep discounts attract major international buyers willing to take on higher transportation and security risks around the Strait of Hormuz.
Uday Awad, head of the Iraqi parliament's finance committee, told Rudaw on September 27 that discounts offered to buyers currently range from approximately 10% to 20%.
"Discounts continue and vary per the buying company. The range is from 10 to 20 percent. The discount is a compensation for the security risks that exist in the Strait of Hormuz. Transport and insurance companies are given the discount," Awad told Rudaw.
Awad said Iraq is currently exporting approximately 3 million barrels per day, close to the roughly 3.4 million bpd it exported in February before regional fighting sharply disrupted commercial shipping through the Strait of Hormuz.
At one stage earlier this year, Iraqi exports through the strait fell to less than 10% of their pre-conflict level, according to Iraq's oil minister.
The disruption placed significant pressure on Baghdad because most Iraqi seaborne crude normally leaves through southern Gulf terminals and must pass through Hormuz.
Iraq has since worked to restore exports through a combination of maritime shipments and alternative northern routes.
Iran began allowing selected tankers carrying Iraqi crude to transit the Strait of Hormuz in August after repeated requests from Baghdad.
Traffic through the waterway remains well below levels recorded before the conflict, while vessel operators continue to face elevated insurance, freight and security costs.
Iraq has also shifted more responsibility for transportation risk to buyers by selling crude on a free-on-board basis at its southern ports.
Global commodities trader Vitol has emerged as one of the largest purchasers of Iraqi crude during the export recovery.
An Iraqi energy official told Reuters that Vitol's September allocation was approximately 25 million barrels. A separate industry source put its purchases at between 25 million and 30 million barrels of September-loading crude.
Vitol declined to comment to Reuters.
A September tender reviewed by Reuters showed Iraq's State Organization for Marketing of Oil, or SOMO, offering crude at discounts ranging from $15 to $20.80 per barrel below official selling prices, depending on destination. Trading sources said some cargoes changed hands at even deeper discounts.
Abu Dhabi National Oil Company has also sharply increased its purchases of Iraqi crude.
Reuters reported that ADNOC agreed to buy 40 million barrels for September after receiving an allocation of 32 million barrels for August.
However, allocated volumes have not always translated into actual shipments. One Iraqi source said ADNOC ultimately lifted about 20 million barrels from its August allocation because of export constraints.
The company's September purchases included cargoes priced at substantial discounts to Iraq's official selling prices.
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Iraq exported an average of approximately 2.35 million barrels per day from its southern ports in August, according to Kpler data cited by Reuters.
Basra Oil Company chief Bassem Abdul Karim said southern exports had risen to approximately 2.6 million bpd during September by the time Reuters reported on the Vitol purchases.
Separate Iraqi government statements have placed overall national exports above 3 million bpd when additional export routes are included.
Vitol's Iraqi purchases come as the commodity trader has also taken a significant role in Venezuelan oil exports.
Reuters reported in September that Vitol and Trafigura together were handling nearly 600,000 barrels per day of Venezuelan crude, more than half of the country's approximately 1.17 million bpd of exports recorded in August.
The two trading houses were among the first companies authorized by the U.S. government to market Venezuelan crude following the change in government in Caracas earlier this year.
Vitol senior trader John Addison attended a White House meeting with U.S. President Donald Trump and energy executives in January as the administration discussed Venezuela's oil sector.
The Financial Times later reported that Addison had personally donated about $6 million to political action committees supporting Trump and was involved in efforts by Vitol to secure an early Venezuelan crude transaction valued at approximately $250 million. Vitol told the Financial Times that the donations were made in Addison's personal capacity.
Separately, research published by Oil Change International and the Centre for Research on Multinational Corporations, known as SOMO, identified Vitol as a significant supplier of crude oil to Israel.
The groups reported that Vitol and Heritage Petroleum together delivered approximately 22 million barrels of crude to Israel between October 2023 and June 2026, representing about 11% of Israeli crude imports during the period.
Of that amount, Oil Change International said Vitol supplied nearly 14 million barrels.
The organizations said the shipments went to Israeli refining and petroleum infrastructure and argued that fuels produced from imported crude can ultimately support a range of civilian and military uses.
Oil Change International has characterized Israel's conduct in Gaza as genocide and has called for governments to investigate corporate oil supplies to Israel. That characterization and the organization's policy conclusions are its own.
The rise of Vitol and ADNOC as major buyers illustrates how shipping capability has become increasingly important in Iraq's crude trade.
Iraq does not operate a large international tanker fleet of its own, leaving buyers with access to ships, insurance and global logistics networks in a stronger position to move crude from Gulf export terminals.
While export volumes have recovered substantially, commercial vessel traffic through Hormuz remains far below pre-conflict levels and ships operating in the area continue to face heightened security risks.
The continued discounts therefore represent a trade-off for Baghdad: lower realized prices in exchange for maintaining crude flows and government revenue while transportation conditions remain difficult.
Courtesy: www.thecradle.co
