Iraq hiked its Basrah heavy OSP for Asia

In Asia, Iraq has surprised Asia with a sharp increase in the official selling price of its new Basrah Heavy crude, despite the grade selling at a sharp discount in the spot market last month.
The country's State Owned Marketing Organization late Wednesday raised the OSP for Basrah Heavy by 85 cents/b to a discount of $5.65/b to Platts average Oman/Dubai assessments for cargoes loading in July and heading to Asia.
Trader with a north Asian refiner said, "I'm a bit surprised. It's virgin crude and needed to be discounted more."
Iraq began exports of the new grade this month after separating the Basrah crude steam into Light and Heavy as a measure to improve and stabilize the quality of the more lucrative Basrah Light grade.
But being new crude that is not known to many Asian refiners, spot Basrah Heavy cargoes for loading in July fell to a steep discount to its OSP last month, fuelling anticipation that SOMO may make the OSP more attractive to buyers.
Another trader said, "I believe all expected or hoped for SOMO to do something to help in clearing Basrah Heavy."
Instead, SOMO seems to have taken a cue from Saudi Arabia in setting its OSP, a common practice among Middle East exporters. Saudi Arabia earlier this month raised the OSP for Arab Heavy crude by $1.10/b to a discount of $2.65/b to Platts average Oman/Dubai assessments for cargoes loading in July and heading to Asia.
A third trader said, "Everyone is going to complain that [the OSP] is too high, but unfortunately SOMO follows Saudi closely."
"How SOMO is setting their OSPs is consistent with how they have been doing it in the past... BH is new crude and they will have to relook their methodology."
Under Iraqi's June crude loading program of 37 million barrels -- an average 1.233 million b/d -- of Basrah Heavy, 27.3 million barrels have been allocated as payments to international oil company contractors and a further 9.7 million barrels allocated to other lifters.
As much as 76% of the crude was destined for the Far East, 7% to the US and 17% to Europe. The crude is made up of flows from the West Qurna/2 (47%), Halfaya (32%), Gharraf (12%), Nassiriya (5%) and Tuba (4%) fields.
The grade has an API gravity of 23.55 degrees and a sulfur content of 4.2%, too heavy or sour for some of the regional refineries that do not have capacity to upgrade residue.
India – a key buyer
Over the last month India has emerged as one of the key buyers of the grade, with cargoes also due to be tried by refineries in South Korea. Japanese refiners seem to have limited appetite for the grade.
The third trader also said, "Full assays of Basrah Heavy are circulating around now and this will give refiners more confidence to take Basrah Heavy because at the end of the day, the quality is good and the API gives you back money because of the de-escalation."