Key facts
- ADNOC is purchasing millions of deeply discounted Iraqi crude barrels.
- The UAE producer is processing much of the Iraqi crude domestically and rerouting its own exports to avoid the Strait of Hormuz.
- ADNOC agreed to buy 32 million barrels of Iraqi crude for August at discounts of $24.90 to $27 per barrel.
- ADNOC agreed to buy 40 million barrels for September, with discounts of $18 to $25 per barrel.
- ADNOC lifted about 20 million barrels in August due to export constraints.
- Other major energy companies have also purchased discounted Iraqi crude.
Abu Dhabi National Oil Co. (ADNOC) has secured millions of barrels of Iraqi crude at steep discounts, a move that allows the UAE producer to process more oil domestically and export its own barrels via a route that bypasses the Strait of Hormuz. This strategy is particularly advantageous amid ongoing supply disruptions.
ADNOC agreed to purchase 32 million barrels of Iraqi crude for August at discounts ranging from $24.90 to $27 per barrel. For September, the company committed to buying another 40 million barrels, with 10 million barrels discounted by $18 and 30 million barrels by $25.
However, actual liftings have been constrained by Iraq's ongoing struggles to export its oil. ADNOC was allocated 32 million barrels for August but only lifted approximately 20 million barrels due to availability limitations. So far in September, ADNOC has lifted an additional 14 million barrels.
Iraq's crude exports have fluctuated, with July shipments at 1.374 million barrels per day before recovering to 2.354 million bpd in August, according to Kpler. September exports are currently averaging around 2 million bpd.
These export challenges, exacerbated by historical reliance on Persian Gulf shipping routes and recent permissions for Iraqi tankers to pass through Hormuz, have created significant discounts for Iraqi crude. ADNOC benefits from superior logistics, including its pipeline to Fujairah, which allows for loading outside Hormuz.
ADNOC intends to process much of the acquired Iraqi crude at its Ruwais refinery and use the freed-up UAE crude for international sales. Other major energy firms, including PetroChina, Zhenhua Oil, TotalEnergies, Vitol, Trafigura, Mercuria, and Cathay Petroleum, have also acquired discounted Iraqi barrels.
Iraq aims to significantly increase its oil production capacity in the coming years.