A November 23 customer note, seen by Reuters, stated that the Iraqi Oil Marketing Company (SOMO) has modified the pricing mechanism used to compensate buyers for fluctuations in the intensity of crude exports, starting with shipments of 2021.
This came after SOMO announced its intention to launch a third grade of export crude under the name Basra Medium crude in January by separating the current production of Basra Light crude into two grades.The specific density of the new Basra Light export crude will reach 33 degrees on the American Petroleum Institute scale after the season, while the density of Basra Medium crude will be 29 degrees.
The current Basra Heavy Crude, which SOMO began marketing in 2015, has a density of 24 on the institute’s scale.
SOMO will compensate buyers of Basra Light and Medium Crude by forty cents a barrel for every full degree of lower crude density by American Petroleum Institute standards.
Buyers of Basra heavy crude get 60 cents a barrel for each grade below the density specified by the institute.
Lower oil densities allow more fuel oil to be produced after refining, while higher densities produce more higher value products such as gasoline and diesel when refining.
Iraq’s exports of Basra crude reached about 2.77 million barrels per day in October, the second largest producer in the Organization of the Petroleum Exporting Countries.
The company also issued retrospective official selling prices for the new Basra Medium crude, dealers said.