Some Question Iraq’s Move to Change Oil Price Benchmark

Some Question Iraq’s Move to Change Oil Price Benchmark

Some refiners are expressing unhappiness with Iraq’s move to change its pricing mechanism, Reuters reports.

Last week Iraq’s Oil Marketing Company (SOMO) announced that it was looking to use DME Oman futures for as its price benchmark instead of the average of Platt’s Oman-Dubai prices.

Some refiners believe the change will result in greater market risks due to the longer lead times in pricing, according to Reuters.

Under the new system, oil prices will set two months out.

“The change is significant and will be watched very closely by not only Middle East producers but everyone involved,” Oystein Berentsen, Managing Director for Strong Petroleumm, told Reuters.

Some, however, expressed skepticism.

“We are not supportive. They need to fix their (supply) programme first, before trying to change the benchmark,” an Asian refinery official told Reuters.

The new price benchmark could result in higher returns for Iraq, Reuters reports.

The change, if implemented, will apply to the approximately two million barrels a day (b/d) exported from the Iraqi port of Basra to Asia, according to Reuters.


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