SINGAPORE - Iraq's Oil Marketing Company (SOMO) has revised the price mechanism used to compensate buyers for fluctuations in the density of its crude exports, starting with shipments in 2021, according to a Nov. 23 notice to clients reviewed by Reuters
The announcement follows SOMO's plan to launch a third crude oil export grade called Basra Medium in January, by splitting the existing Basra Light production into two grades.
The new Basra Light export grade will have an American Petroleum Institute (API) gravity of 33 degrees after the split while Basra Medium's gravity will be 29 degrees. The existing Basra Heavy crude, which SOMO started marketing in 2015, has an API gravity of 24 degrees.
SOMO will compensate Basra Light and Basra Medium lifters by 40 cents per barrel for each full degree below the grades' API gravity. Basra Heavy lifters will receive 60 cents per barrel for every degree the cargo is below its specific API gravity, the notice said.
API gravity is an indicator of an oil's density. Lower gravity oil tends to produce more fuel oil after refining while higher gravity crudes tend to produce more higher-value products such as gasoline and diesel fuel when refined.
Iraq exported about 2.77 million barrels per day of Basra crude in October and it is the second-largest producer in the Organization of the Petroleum Exporting Countries.
Reuters could not immediately reach SOMO for comment.
(Reporting By Shu Zhang; Editing by Christian Schmollinger) ((firstname.lastname@example.org; +65-6870-3549; Reuters Messaging: Twitter @shuzhang4))