Iraq's Basrah Medium is trading at a $43.06 discount to the Murban benchmark as tanker traffic through the Strait of Hormuz stays severely restricted, splitting crude into two tiers. Oil that avoids the strait, from Australia's Pyrenees blend to Russia's ESPO, is fetching sharp premiums, while freight costs for shipping US crude to Asia have also surged.
Iraq's Basrah Medium for loading next month is being offered at a discount of $43.06 per barrel to the regional Murban benchmark, Reuters' Clyde Russell reported, citing Argus data. Murban, ADNOC's flagship blend loaded at the port of Fujairah just outside the chokepoint, is trading at over $127 per barrel, underscoring the gap between oil that must pass through Hormuz and oil that does not.
Brent is trading at over $107 per barrel, and WTI is moving closer to $103, two months after the United States and Iran agreed to a 60-day ceasefire in the Persian Gulf. Iraq, OPEC's number-two producer, has had to offer heavy discounts to entice buyers to take on the risk of moving crude out of the Gulf, even though Iran reportedly granted Iraqi cargoes an exemption from attack.
Tanker traffic through Hormuz stays choked
Ship-tracking data shows tanker movements through the Strait of Hormuz remain severely subdued. Windward reported just one outbound tanker for September 14, with two more entering the waterway that day, and all three vessels were liquefied petroleum gas carriers.
Non-Gulf crude commands a growing premium
Australia's medium sweet Pyrenees blend traded at $138.04 per barrel last Friday, up from $70.59 per barrel on February 27, before the US and Israel strikes on Iran ignited the war. Russia's ESPO blend, loading from the Far East, traded as much as $10 per barrel above Brent earlier this month as Chinese refiners rushed to replace paralyzed Iranian barrels. Indian refiners have also bought more ESPO from the port of Kozmino, pushing total exports of the blend up 6% in the first half of the year.
Freight costs to Asia climb as well
The cost of shipping US crude oil to Asia has climbed to what shipping market data describes as record or near-record levels, as the Hormuz disruption and the closure of Saudi Arabia's East-West pipeline push Asian refiners toward more US barrels. Japan is especially exposed: it sources around 95% of its oil from the Middle East, with roughly 70% of total supply passing through Hormuz. Market participants say US crude has so far remained competitive on a landed basis in Asia, though that margin is being squeezed as freight keeps climbing.
Saudi Arabia is trying to repair its East-West pipeline while Yemen's Houthis have struck fresh targets in the kingdom. The gap between Hormuz-bound oil and crude that can move freely may widen further as the war intensifies.
Sources: Oilprice.com, InvestingLive
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