Changing the pricing method of Iraqi crude oil raises the reserve of refiners

Changing the pricing method of Iraqi crude oil raises the reserve of refiners

 Translation / Range

Iraq's proposal to change the pricing of its crude oil in Asia faces refiners that fear more risks because of a longer period between pricing and delivery.
Iraq's oil marketing company Sumo surprised traders this week by seeking to poll its plans to change the benchmark price of Basra crude in Asia to be determined on the Dubai Mercantile Exchange starting in January 2018 instead of pricing on the Standard & Global Plats. "
The move could affect the price of about two million barrels per day of crude oil supplies to Asia, especially those destined for India, China and South Korea. The Managing Director of Strong Petroleum in Singapore, Oystein Bernstein, said that "the change is important and will be monitored Closely, not only from the producers of the Middle East but from all concerned. "
Under the new method, Basra crude will be priced using the average monthly price of Omani crude oil futures on the Dubai Mercantile Exchange two months before the oil is loaded. Other producers in the Middle East, such as Saudi Arabia, Kuwait and Iran, are pricing their crude based on the month of loading. The first, based on futures in the Dubai Mercantile Exchange in August.
This will expose buyers to risks, as they will only be notified by mid-September whether they have accepted their offers to buy shipments, making it difficult for them to pre-hedge price changes.
"They have to reform their supply program first, before they try to change the benchmark," traders said. "The timing of pricing for other producers makes it difficult to compare ore valuations" .
While buyers are concerned that about 80 percent of the crude used to price Oman futures contracts on the Dubai Mercantile Exchange is going to China, reflecting the economic and fundamentals of only one Asian buyer. Ade Emsirovic of the Center for Energy Economics at the University of Surrey in Britain, "The transition to Oman's contracts on the DME is very ambitious," he said. "It will cause a few difficulties. It will be very difficult technically." Somo did not comment on its motives for change, and the move to the DME may bring higher prices for the company , As the average monthly price of Omani crude contracts on the Dubai Stock Exchange Ge, increase levels of about three dollars above the average calendars of Oman and Dubai crude on the Platts platform, between March and July was the last two.
On the other hand, some traders support this move, because knowing the price of Iraqi crude two months before the delivery gives traders who have shipments of Basra crude without specific destinations, more time to determine the destination where they will sell oil, based on the differences in prices in the region.
It is not yet clear whether SOMO will proceed with the move, as the company is expected to solve the problems faced by customers, according to a source familiar with the Iraqi plan. Baghdad may change the measurement price, but while maintaining the current pricing period, This means that crude pricing will still be based on the same month of loading.
In the oil market, oil prices rose on Thursday as the US oil sector prepared for a potential production disruption as Hurricane Harvey headed to the Gulf of Mexico oil hub.
The storm has been growing stronger since Wednesday, and may turn into the biggest hurricane to hit the US mainland in 12 years, heading toward the area between Houston and Corpus Christi on the Texas coast.
US WTI crude futures rose 33 cents, or 0.7 percent, from the previous level to $ 47.76 a barrel. Global Brent crude futures rose 38 cents or 0.7 percent from the previous close to $ 52.42 a barrel, Prices have risen as production facilities in the affected area are closed in preparation for the hurricane, with expectations that closures could continue if the storm caused extensive damage.
Far from the potential impact of the storm on the oil sector, the crude market is still abundant in world supply, despite efforts by the Organization of the Petroleum Exporting Countries (OPEC) to cut production to boost prices.
The rise in crude supplies is partly due to US production, which jumped 13 percent since mid-2016 to 9.53 million barrels per day (bpd), close to its record 9.61 million bpd in June 2015.


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