Somo Signs Deal to Buy 1.5m Tonnes of Fuel

Source: Reuters 1/4/2012, Location: Middle East

Iraq's State Oil Marketing Organization (Somo) has signed a deal to buy nearly 1.5 million tonnes of gasoil and petrol for delivery over the first half of the year, industry sources said. It is set to purchase two cargoes of 16,000 tonnes each of 0.1 per cent sulphur gasoil every month from Vitol at a premium of $9.67 a barrel to Middle East quotes, one of the sources said.

The cargoes are to be delivered into the Khor Al Zubair terminal. Overall volumes bought for gasoil are about half the usual volumes imported into Iraq every month, the source added.

"It's still unclear how they are going to cover the rest of the supplies as they usually need about three to four cargoes a month," he said.

For petrol, Somo agreed to buy 400,000 tonnes from Gunvor, 400,000 tonnes from Trafigura, 200,000 tonnes from Total and 300,000 tonnes from Vitol. The prices for separate cargoes were not immediately available. The company has not bought kerosene, which it was seeking through the same tender and could likely be acquiring the barrels from Iran, one of them said.

Somo had initially sought 1.365 million tonnes 92 RON petrol, 773,000 tonnes of 0.1 per cent gasoil and 292,000 tonnes of kerosene for delivery over January to June.

"The thing with Iraq is they never actually take as much as they contract for. Their terminal capacity is limited," a Gulf-based middle distillates trader said.

Years of war, militant attacks, and under-investment have forced Iraq to rely on imports for its fuel needs, making it one of the biggest buyers of petrol and gas oil in the region. But due to the limited capacity of the Khor Al Zubair terminal, the war-torn country ends up buying much less than its contracted volumes, traders say.


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