Iraq Offers Crude at $33 Discount to Lure Tankers to Hormuz

Iraq slashed prices for its May-loading crude by as much as $33.40 a barrel, a desperate measure to keep oil flowing through the Strait of Hormuz as the waterway remains partially blocked by the ongoing Iran conflict. The move affects roughly 20% of the world's oil supply and comes as Brent crude holds near $114 a barrel.

According to a May 3 notice from state oil marketer SOMO seen by Reuters, the OPEC producer is offering its flagship Basrah Medium crude at a discount of $33.40 to its May official selling price (OSP) for loading between May 1-10. For the remainder of the month, the discount is $26 a barrel.

The notice also detailed a $30 per-barrel discount for Basrah Heavy crude. All cargoes are sold on a free-on-board basis from the Basrah Oil Terminal or Single Point Moorings, both located deep inside the Persian Gulf, requiring tankers to pass through the strait. The OSP is determined on the final destination of the cargoes, the document said.

These steep discounts underscore the mounting pressure on Iraq’s exports, which averaged 3.33 million barrels per day in 2025. With shipping risks and insurance costs soaring, tanker traffic has plummeted. According to Kpler data, only two vessels loaded at the Basrah port in April. The strategy is a direct test of whether price incentives can overcome the physical dangers of navigating the critical artery.

The market remains skeptical. A prediction market on the “Strait of Hormuz Ship Transit” has lowered the probability of at least 20 ships transiting by the end of May to 59.5%, down from 72% just 24 hours ago. While the discounts could place some downward pressure on global WTI prices by encouraging supply, the primary market driver remains the extreme geopolitical risk.

This article is for informational purposes only and does not constitute investment advice.