Key facts
- Iraq's cabinet approved a new crude discount mechanism and three-month export contracts to boost revenue.
- The discount mechanism, effective September 1, will offer 30% off the lower of Somo's price or the federal budget's stipulated oil price.
- Chinese refiners have purchased 8 million barrels of Iraqi Basrah Heavy and Basrah Medium crude.
- Iraq's oil exports have averaged 2 million barrels per day so far in August, down from pre-war levels.
- Disruptions in key shipping lanes, including the Strait of Hormuz and the Red Sea, have impacted global oil flows.
- Iraq's oil revenue fell to ID28.5 trillion in H1 2026 from ID57 trillion in H1 2025, contributing to a fiscal deficit.
Iraq's cabinet has approved a new crude discount mechanism and three-month export contracts to boost oil revenue amid reduced sales due to traffic restrictions through the Strait of Hormuz. Effective September 1, crude purchases will receive a 30% discount. This measure aims to restore exports and bolster revenue, which has fallen sharply, contributing to a significant fiscal deficit.
Chinese refiners have been purchasing Iraqi crude, including 8 million barrels of Basrah Heavy and Basrah Medium, to compensate for supply disruptions elsewhere. While oil continues to flow through the Strait of Hormuz, flows have been reduced, with some tankers turning off transponders. Saudi Arabia has also diverted exports due to Houthi attacks in the Red Sea.
Iraq's oil exports have averaged approximately 2 million barrels per day so far in August, a decrease from pre-war levels and July's figures. The fiscal impact has been substantial, with oil revenue effectively halving year-on-year and the deficit exceeding 21 trillion Iraqi dinars in the first half of 2026.