Bloomberg: ADNOC steps in to shuttle Iraqi crude through Hormuz

Abu Dhabi National Oil Co. (ADNOC) is offering to transport Iraqi crude through the Strait of Hormuz using a shuttle strategy it has employed to move its own exports amid ongoing disruptions in the Persian Gulf, Bloomberg reports.

The UAE state oil company’s trading arm has offered spot cargoes to Asian buyers in recent days, using the same approach to transport crude from other Middle Eastern producers, particularly Iraq, the sources said. Indian refiners were among those that received offers.

ADNOC has been among the most successful Gulf producers in moving crude through the Strait of Hormuz during the conflict with Iran. Its so-called shuttling strategy involves vessels making short voyages, often with their transponders switched off, before transferring cargoes to other tankers outside the Persian Gulf.

The method has become an increasingly important means of moving oil out of the Gulf despite the ongoing conflict, helping limit the impact of disruptions on global crude prices. However, it is unusual for Middle Eastern producers to rely on neighboring countries to help transport their energy exports.

Until now, trading company Vitol Group and French energy major TotalEnergies have been among the main carriers of Iraqi crude. ADNOC’s involvement may already be contributing to higher Iraqi exports.

Ali Nizar, head of Iraq’s state-owned oil marketing company SOMO, said that the country’s crude exports had recently risen to around 2 million barrels per day this month. That compares with an estimate of 1.5 million to 1.7 million bpd given by Iraq’s oil minister last week.

An ADNOC spokesperson said the company does not comment on commercial matters. SOMO did not immediately respond to a request for comment.

The development comes as Washington and Tehran have hardened their positions in negotiations over reopening the Strait of Hormuz. Pakistan’s defense minister, however, said that the two sides were close to reaching an arrangement.

The stop-start negotiations, coupled with continued attacks on vessels, have made it increasingly difficult for Persian Gulf producers to move their crude to international markets. Several ADNOC tankers were attacked while transiting the Strait of Hormuz last week.

Offers from other oil traders have also slowed this month as tensions in the Gulf have intensified, according to the sources.

Iraq has so far relied largely on a strategy of selling crude on a loading basis, leaving transportation to other companies, SOMO’s Nizar told a local television station this week.

ADNOC, by contrast, operates its own tanker fleet, which it has expanded in recent years, and has also chartered vessels from Sinokor Group, the world’s largest oil supertanker owner.

SOMO has offered steep discounts to buyers and companies willing to transport Iraqi crude through the Strait. Prices for cargoes loading this month have reportedly been discounted by as much as $30 a barrel below benchmark levels, while Basrah Medium crude has been offered at discounts of $25 to $27 a barrel.

By Vafa Guliyeva