Iraq offers the biggest discount in history: $33 off per barrel, but buyers must navigate the "dangerous route" of the Strait of Hormuz to pick up the goods.

Iraq offers the biggest discount in history: $33 off per barrel, but buyers must navigate the "dangerous route" of the Strait of Hormuz to pick up the goods.

```

Iraq is willing to offer a discount of $33 per barrel, but at a price—the buyer must pick up the goods at the edge of the war zone themselves.

According to a Bloomberg report on May 5, Iraq's State Oil Marketing Organization (SOMO) sent a price notice to buyers with contracts this month, offering up to a $33.40 per barrel discount on the flagship Basrah Medium crude oil.

There is a premise behind this discount: the buyer's tanker must cross the Strait of Hormuz and enter deep into the Persian Gulf for loading. Since the regional conflict erupted at the end of February this year, this shipping route has almost been paralyzed.

Discount Scale: Time-Phased Offers, Up to $33.40 per Barrel

According to the SOMO notice dated May 3 seen by Bloomberg News, the size of the discount is divided by loading periods:

  • Basrah Medium crude loaded May 1–10: Discount of $33.40 per barrel
  • For the rest of May: The discount narrows to $26 per barrel
  • Basrah Heavy crude: Discount of $30 per barrel below the official price

In addition, last week SOMO also separately sold Qaiyarah crude via spot tender, but loading must also be completed deep in the Persian Gulf.

Risk on Buyers: Force Majeure Explicitly Excluded

There is a clause in the price notice that warrants high market attention.

SOMO states clearly that if buyers accept the May price terms, "since this price is offered under the current special circumstances known to all parties, the force majeure clause does not apply to this offer."

In other words, Iraq has defined the current geopolitical risk as a "known condition," and once buyers accept, if losses occur during transit due to war, force majeure exemption cannot be invoked. This effectively transfers all the risk of traversing the Strait of Hormuz to the buyer.

Shipping Nearly at a Standstill: Only Two Tankers Loaded in April

The reason for such large discounts lies in the severe predicament facing Iraq's oil exports.

According to Bloomberg's compilation of Iraq tanker tracking data, only 2 tankers loaded at Basra's southern port in April, compared to 12 in March. Normally, the port can host up to 80 tankers a month.

The reason is straightforward: empty tankers cannot traverse the Strait of Hormuz into the Persian Gulf, causing loading operations to almost halt. Iraq can still export crude via the Turkish pipeline, but the scale is far less than seaborne exports.

Geopolitical Risks Escalate: Ceasefire Prospects Uncertain

Just before and after SOMO sent out the price notice, regional tensions flared again.

A new round of U.S.-Iran clashes broke out on Monday, casting a shadow over the ceasefire agreement that had held for around four weeks. Whether the Strait of Hormuz will reopen remains highly uncertain.

For the market, this means Iraq's massive discount is not merely commercial concession, but a direct manifestation of risk premium—the $33 per barrel discount is the "insurance fee" Iraq is offering to attract buyers to take on the geopolitical risk.

SOMO did not immediately respond to Bloomberg's request for comment.

Risk Disclosure and DisclaimerThe market has risks, investment needs caution. This article does not constitute individual investment advice and does not take into account the special investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investing based on this is at your own risk. ```