Iraq's State Oil Marketing Organization (SOMO) did not award two offers of spot shipments to Asian and European customers as it had expected to get a higher price than they were ready to pay.
It was a failure as the producer intended to revamp the way it sells crude. This is amid a global glut, low prices and higher competition from other Middle East producers and supplies from the United States.
Iraq began auctioning off some cargoes this year in an attempt to get better price for its supply while also curbing output as part of a deal with OPEC and other producers.
“SOMO has to walk a tightrope between trying to capture the maximum value for its oil and its sales,” said Nevyn Nah, an analyst at Energy Aspects Ltd. “The only concern is that term holders may reduce their volumes if official prices are too high.”
In October, SOMO received no bids in its auction for November supplies of its benchmark Basrah Light grade. According to traders, only bids at a premium to the oil’s official selling price set by Iraq for its long-term supply were permitted, while buyers were valuing the crude at a discount.
