Iraq plans major change in pricing for Asia

Dhaka,  Sun,  24 September 2017
Published : 22 Aug 2017, 21:32:18
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Iraq plans major change in pricing for Asia

Oil rises ahead of US stocks data
SINGAPORE/DUBAI, Aug 22 (Reuters): Iraq has informed its customers that it plans to switch its price benchmark for Basra crude in Asia to DME Oman futures from January, dropping the average of Platts' Oman-Dubai quotes, in a major shift in the way it prices its oil.

The proposal by state-oil marketer SOMO would mark a significant change by OPEC's second-largest producer away from fellow members Saudi Arabia, Kuwait and Iran, which have been using price assessments from global agency S&P Global Platts as their benchmark for decades.

It throws down the gauntlet on setting prices for more than 12 million barrels per day of Middle East crude in Asia, challenging the role of the world's top exporter Saudi Arabia.

"In an effort to realize the intrinsic value of our crude exports to Asia as to be in alignment with the recent market perception, we are contemplating a change of the current pricing formula for the Asian market," SOMO said in a letter dated Aug. 20 and sent to its customers, according to a copy seen by Reuters on Monday. It asked customers for opinions on the plan by Aug. 31.

The Dubai Mercantile Exchange (DME) said it would not be making any statement at this time on the move. SOMO did not immediately respond to a Reuters request for comment.

Another report from London adds: Oil prices rose on Tuesday, lifted by indications that supply is gradually tightening, especially in the United States (US).

Benchmark Brent crude LCOc1 was up 30 cents at $51.96 a barrel by 1345 GMT. US light, sweet crude CLc1 was also 30 cents higher at $47.67.

"US crude oil stocks have been falling consistently in recent weeks," said Fawad Razaqzada, market analyst at futures brokerage Forex.com.

"If the downtrend in oil inventories is maintained, then a bullish case can be made for oil, especially given the ongoing supply restrictions from OPEC and Russia," he added. US commercial crude inventories have fallen by almost 13 per cent from their March peaks, to 466.5 million barrels.

The OPEC and non-OPEC producers including Russia have pledged to hold back about 1.8 million barrels per day (bpd) of output between January this year and March 2018 in order to tighten supplies and prop up prices.
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