ADNOC Scoops Up Iraqi Crude at $25 Per Barrel Discount

ADNOC, the UAE oil producer, has secured a substantial purchase of Iraqi crude at discounted prices, processing a significant portion domestically and shifting more barrels to export routes that circumvent the Strait of Hormuz. The company committed to buying 32 million barrels of Iraqi crude in August at rates ranging from $24.90 to $27 per barrel, as well as another 40 million barrels for September, with discounts ranging from $18 to $25 per barrel, according to sources cited by Reuters.

However, Iraq's production struggles have resulted in actual liftings falling short of the allocated quantities; ADNOC lifted approximately 20 million barrels in August and 14 million barrels in September. September's exports have been around 2 million barrels. Iran recently permitted some Iraqi tankers to pass through Hormuz after Baghdad's request, which has helped improve Iran's exports from 1.374 million barrels per day in July to 2.354 million barrels in August.

September exports are estimated at around 2 million barrels. Iraq lacks its own shipping capacity and has traditionally relied on Persian Gulf transport, making its barrels particularly susceptible to disruptions. This has led to extraordinary discounts. ADNOC, with its superior logistics, can transport its own crude via pipeline to Fujairah, where tankers load outside Hormuz.

UAE crude exports have increased from 2.871 million barrels in July to 3.236 million barrels in September. ADNOC intends to run most of the Iraqi crude through its Ruwais refinery and sell additional UAE crude in the international market, as per a Reuters source. Other purchasers have recognized the deal, including PetroChina, Zhenhua Oil, TotalEnergies, Vitol, Trafigura, Mercuria, and Cathay Petroleum.

Iraq aims to increase its production from around 4 million barrels per day to between 8 million and 10 million barrels within six years.