Middle East oil exports seek new channels: Adnoc plans to help Iraqi crude oil bypass the risk of Hormuz

The Zhitong Finance App learned that people familiar with the matter revealed that Abu Dhabi National Petroleum Company (Adnoc) is proposing to provide shuttle transportation services for Iraqi oil exports to help it pass through the Strait of Hormuz and use its “undercurrent transportation” strategy to transport Basra and other crude oil to refineries in Asia.

As the national oil company of the United Arab Emirates, Adnoc is the most successful producer in shipping crude oil out of the Persian Gulf. The company uses so-called “shuttle” tactics, where the ship sails for a short distance (usually turning off the transponder to evade surveillance) and then usually transfers the cargo to another ship at the immediate exit of the Persian Gulf.

People familiar with the matter said that in recent days, Adnoc has provided spot goods to Asian buyers, using the same means to transport crude oil from other Middle Eastern producers (most prominently Iraq).

This method of shuttle transportation (used by some producers other than Adnoc) has become an important way to transport oil out of the Persian Gulf even during the Iran war, helping to curb the rise in global oil prices. However, it is extremely rare for Middle Eastern countries to turn to their neighbours to help transport their energy exports.

An Adnoc spokesperson said the company would not comment on commercial matters. Iraq's National Petroleum Marketing Organization (SOMO) did not immediately respond to requests for comment.

Previously, trading giant Vitol Group and French energy giant Total Energy had always been the main carriers of Iraqi crude oil. Adnoc's launch proposal may have had an impact. SOMO chief Ali Nizar said on Tuesday that crude oil exports this month have recently jumped to around 2 million barrels per day. By contrast, the Iraqi oil minister last week estimated 1.5 million to 1.7 million barrels per day.

Although Pakistan's defense minister said on Tuesday that the US and Iran are close to reaching some kind of arrangement, the US and Iran have both recently hardened their attitudes during negotiations to reopen the Strait of Hormuz. Talk about judging the intermittent pace and ongoing attacks on ships, making it very difficult for Persian Gulf producers to export oil. Last week, several Adnoc tankers were attacked as they passed through the Strait of Hormuz.

People familiar with the matter said oil sales by traders other than Adnoc have slowed down this month as tension in the Persian Gulf has once again escalated.

Iraq's SOMO has been offering huge oil discounts to companies willing to pass through the Strait of Hormuz, offering drastic price cuts of up to $30 per barrel for goods loaded this month below the benchmark price. Discounts range from $25 to $27 per barrel for its flagship Basra Intermediate crude oil.