SUBSCRIBER NOTE: Platts to launch FOB Basrah Light, Heavy crude assessments

S&P Global Platts will begin publishing price assessments for Iraqi Basrah Light and Basrah Heavy crude oil cargoes on an FOB Iraq basis from November 1, 2017. These new assessments will complement existing Platts assessments for Basrah Light on a delivered US Gulf Coast basis.

The assessments will reflect cargoes of Basrah Light and Heavy crudes, each 1 million barrels loading on a free-on-board basis from Al Basrah Oil Terminal (BOT) or Khor al-Amaya Oil Terminal (KOT).

In line with other Platts assessments for crudes around the world and in the Middle East, Platts' new assessments will reflect crudes traded on a destination-free basis.

Spot market trades for crudes with regional restrictions in place would be normalized in value to reflect open destination. Platts understands open-destination cargoes of both these grades can often trade at a premium to destination-restricted cargoes. Such premiums vary over time, from relatively minimal levels to occasionally as much as $1/b above destination-restricted cargoes. Platts will survey market conditions to determine the quantum to be used for normalizing the value of spot trades heard for destination-restricted cargoes.

Platts will publish assessments for both grades for two consecutive months from the month of publication. For each grade, Platts will publish a differential to Iraq's Asia Official Selling Price for the month of loading as well as an outright price.

For example, in November, Platts will publish outright prices and differentials to the OSP for Basrah Light and Basrah Heavy cargoes loading in December (M+1) and January (M+2).

Platts outright assessments for Basrah Light and Basrah Heavy will reflect traded values for the grades, without any adjustment due to compensation via a de-escalator that a buyer may receive subsequent to loading due to quality differences.

Platts understands that a system of API de-escalators is in place for both grades to compensate buyers for any drop in quality below their respective standards. The API standard for Basrah Light is currently set at 34 API and buyers stand to receive 40 cents/b per one degree drop in API. Similarly, the Basrah Heavy standard is set at 26 API and buyers stand to receive 60 cents/b per one degree drop in API.

Platts will assess the value of Basrah Light and Heavy cargoes using information on bids, offers and trades in the Middle East Sour Crude Market on Close assessment process, trades on exchanges, tenders and in the over-the-counter markets.

The launch of these assessments follows an extended period of engagement with industry participants amid a steady evolution in the quality and markets for Basrah crudes and their growing popularity among Asian refiners. Exports of Basrah Light and Basrah Heavy to Asia are estimated at 2 million barrels a day.

Iraq segregated the Basrah crude stream into Basrah Light and Basrah Heavy mid-2015 to improve and stabilize the quality of the crude oil it exports.

Publicly available crude assays indicate Basrah Light API of 29.90 degrees and sulfur content of around 2.93%, and Basrah Heavy typical API of 24 degrees and sulfur content of around 3.83%.

Combined exports of the two grades averaged about 3.24 million b/d in the first seven months of the year, according to Iraq's Oil Marketing Company, SOMO. Basrah Heavy comprises about a quarter of total exports from southern Iraq.

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