Iraq's SOMO has offered wide discounts to its official selling prices to encourage term buyers to lift Basrah crude from its terminal inside the Persian Gulf in July, according to trade sources and a document reviewed by Reuters.
The discounts for Basrah Medium crude ranged from $14 to $16 a barrel while those for Basrah Heavy crude were between $16.80 and $18.80 a barrel, depending on the loading period. Discounts are wider for cargoes loading between July 1 and 5 and they become narrower for cargoes loading July 6-10 and July 11-31.
Buyers are requested to submit their nominations for quantity within a day from receiving the letter, SOMO said.
The discounts are meant as compensation for buyers who have to pay high chartering costs for ships to enter the Strait of Hormuz to fetch the oil, a trade source said.
The daily time charter rate for a very large crude carrier to load two million barrels of crude from the Middle East to China has climbed to about $300,000 from about $220,000 on February 27, before the US and Israel launched strikes on Iran, but has dropped from a peak of about $600,000 in March, LSEG data shows.
The wide discounts for Basrah crude may entice buyers, but the question remains if the Strait of Hormuz is passable, two other people said.
Last week, SOMO issued a tender to sell July-loading crude but it failed to attract buying interest as traders had difficulties in booking tankers to enter the gulf, another source said.
Other Middle East producers are pushing ahead with oil loadings, but shipping in the strait has slowed following fresh ship attacks and renewed strikes between the US and Iran in recent days.
(Reporting by Florence Tan in Singapore and Nidhi Verma in New Delhi; Editing by Tom Hogue and Sonali Paul)
