UAE helps Iraq increase oil exports through Hormuz
The state oil company of the UAE, ADNOC, has offered Asian buyers supplies of Iraqi oil under a scheme that allows continued exports through the Strait of Hormuz despite ongoing risks to shipping. This mechanism has already helped the Emirates maintain its own exports from the Persian Gulf and is now being used for crude from other regional producers, primarily Iraq.
According to Bloomberg, ADNOC's trading arm in recent days offered spot market cargoes of Iraqi oil, including the Basrah grade. Potential buyers included oil refineries in India.
The scheme involves short tanker voyages through the Strait of Hormuz followed by transshipment of the oil onto other vessels outside the Persian Gulf. This shipping method has become one of the instruments allowing oil companies to maintain supplies to Asian markets amid disruptions to regular maritime traffic.
Iraq's exports rose to about 2 million barrels per day
ADNOC's offers came amid increased supply of Iraqi oil. The head of the state oil trading company SOMO, Ali Nizar, said that exports in recent days in August rose to about 2 million barrels per day.
Just a week earlier, Iraq's oil minister estimated supplies at about 1.5–1.7 million barrels per day. Bloomberg notes that ADNOC's participation in transporting Iraqi crude could have contributed to the export growth, although the exact volume of oil shipped under this scheme is not disclosed.
Before the crisis around the Strait of Hormuz, the bulk of Iraqi oil from southern fields was exported via terminals in the Persian Gulf. Disruption of maritime links became a serious problem for Baghdad: previously the country's authorities reported that most of Iraq's oil exports passed through Hormuz.
Iraq offers large discounts to buyers
To encourage companies to pick up oil from terminals themselves and assume the risks of passing through the strait, SOMO offers significant discounts. For cargoes loaded in August, the discount in some cases reaches $30 per barrel relative to market benchmarks.
For the main export grade Basrah Medium, discounts were about $25–27 per barrel. Iraq mainly sells oil on terms under which the buyer assumes responsibility for further transportation.
ADNOC has its own large fleet, giving the company greater ability to arrange shipments under difficult conditions. The Emirati company also charters additional tankers from third-party shipowners. An ADNOC representative declined to comment to Bloomberg on specific commercial operations.
Hormuz remains a key risk for the oil market
The situation in the strait remains unstable due to the conflict around Iran and ongoing attacks on ships. Negotiations on restoring free navigation have not yet led to a final agreement, so oil-producing countries in the Persian Gulf are looking for alternative ways to deliver crude to buyers.
The UAE is in a more advantageous position than most of its neighbors: ADNOC has a pipeline with capacity of about 1.5 million barrels per day to the port of Fujairah, located outside the Strait of Hormuz. The company is also building a second pipeline, which from 2027 should roughly double oil export capacity through the country's eastern coast.
For Iraq, such bypass options are far more limited, so restoring stable supplies through Hormuz is of direct importance for the country's oil revenues. ADNOC's involvement in transportation allows Baghdad to increase exports even before full restoration of free tanker movement through the strait.
