Iraq’s Oil Marketing Company (SOMO) has informed its clients it is unable to compensate for an enormous leap in freight prices for crude oil cargoes heading to Europe and the Americas in April.
The decision was made due to “the dramatic and unprecedented changes in the freight charges in parallel with the steep drop in crude oil costs,” the company stated in the notice that was issued to customers.
Freight costs leaped worldwide since extra ships are now needed to deliver oil, with Saudi Arabia and different Center East producers ramping up output after talks to increase a production cut agreement between the OPEC+.
SOMO had been offering buyers for cargoes to Europe and the Americas a rebate if freight prices rose above a certain degree, sources with knowledge of the matter stated.
The rebate was aimed toward gaining market share in those areas, they stated. The people with information on the matter declined to be recognized due to the sensitivity of the matter.
SOMO’s decision to revoke the rebate has taken buyers off guard as April-loading cargoes have already been allocated and traded available in the market, the sources stated.
In its notice, SOMO recommended that prospects who also have refineries in Asia ought to move their cargoes to the east rather than the west.