Iraq is currently trying to find oil tankers to facilitate exports through the Strait of Hormuz, a crucial shipping lane. This comes after Iran recently granted permission for Iraqi oil cargoes to transit the strait, following a period where the chokepoint's effective closure severely hampered Iraq's oil exports. Despite this permission, Iraq faces a significant hurdle: it does not own the supertankers necessary for large-scale crude transport and relies entirely on foreign-owned vessels, which buyers are typically responsible for arranging.
However, global shipping firms are exhibiting high risk aversion due to heightened tensions in the region, leading to difficulties in securing these vessels. Senior analyst June Goh from Sparta Commodities noted that Iraq has been offering substantial discounts of $25 to $30 a barrel for August-loading cargoes from its Basrah terminal, incentivizing buyers to find shipping options. This strategy has already led to increased purchases by refiners in India and China, with Chinese refiners alone estimated to have bought at least 16 million barrels of Basrah crude for September delivery.
The primary challenge remains the reluctance of shipping companies to operate in what they perceive as a high-risk zone, resulting in soaring maritime insurance premiums. An Iraqi official highlighted that the Iraqi Oil Tankers Company's fleet is inadequate for supertanker operations, emphasizing the country's reliance on a "free on board" system where buyers provide the tankers. For Iraq, which depends on oil sales for about 90% of its federal revenue, the current situation, despite increased exports in August to 2.34 million barrels per day, is a short-term survival strategy rather than a sustainable economic model.
