Iraq

Iraq has ended exports of Basrah Light — its main crude export grade for decades. The move is apparently aimed at limiting the compensation it pays customers for substandard cargoes as its oil production becomes heavier. State oil marketer Somo notified customers in December that it would stop allocating cargoes of the medium, sour grade from January. It said it planned to keep its lighter crude for domestic consumption instead, and it issued no official January formula price for Basrah Light. A shipping agent confirmed that the export grade had been discontinued, saying that Basrah Light no longer matched its notional API gravity. The agent added that crude previously marketed as Basrah Light will now be sold as Basrah Medium, the third Basrah grade introduced by Somo last January. A Mideast Gulf crude trader said the market reaction had been fairly muted, but he noted that lifters of Basrah crude would be watching to see how Somo's decision to stop selling Basrah Light would affect the quality of Basrah Medium. "If it becomes lighter … it might reduce the [attractiveness of] the grade," the trader added. Basrah Medium had already become Iraq’s main export grade by volume. Under a de-escalation mechanism agreed in 2010, Somo was required to compensate its customers 40¢/bbl for every 1° drop below the official API gravity of 33° for Basrah Light and 29° for Basrah Medium, as of January 2021.