Spot Market for Iraqi Oil and Perspectives of Transformation of Crude Oil Price-Setting

DOI: 10.20542/0131-2227-2017-61-12-36-42

S. Zhukov (,
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (IMEMO), 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation;
I. Kopytin (,
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (IMEMO), 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation 

Abstract. The article analyses perspectives for developing a new spot market for Iraqi oil in the context of the sharpening competition of oil-exporters for export niches. Since opening of its oil sector to foreign capital and technology in 2009/2010 Iraq has firmly established itself as an important supplier of oil to European, Asia-Pacific and even US markets. In the present mechanism of crude oil price-setting Iraq is forced to adjust its oil export prices to the benchmarks established by more powerful market players. Meanwhile, the produced volumes of both Iraqi brands – Basra Light and Basra Heavy – are sufficient for launching a sustainable spot trade. The spot market will allow exporters of Iraqi oil to build long lasting partnerships with its buyers, e. g. refining plants in Europe and Asia-Pacific. Besides, the liquid and transparent spot prices will help the central authorities of Iraq to impose a discipline on the oil export which presently is in a chaotic stance. The spot market is promoted by a cooperation between the State Oil Marketing Organization and the Swiss trading arm of the Russian oil company Lukoil. Transfer of Iraqi oil exports to spot could trigger major adjustment or, possibly, even dismantling of the current institute of the official selling price presently used by OPEC countries. It is highly probable that in the medium term perspective new transparent and liquid spot market, localized in The Dubai International Financial Centre, will be integrated into the financial market. Eventually, this will lead to a structural strengthening of the world oil market. 

Keywords: world oil market, Iraq, spot market, official selling price, Brent, Basra Light, Basra Heavy, Lukoil, Dubai Mercantile Exchange 


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For citation:
Zhukov S., Kopytin I. Spot Market for Iraqi Oil and Perspectives of Transformation of Crude Oil Price-Setting. World Eonomy and International Relations, 2017, vol. 61, no. 12, pp. 36-42.

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