[SNSUC Crude Watch] Basrah Medium at parity, Heavy -$3.30; Oct term discounts deepen to -$34.50/-$37.00 as Hormuz strikes lift war risk to 8x

SOMO kept October Asia OSP at Basrah Medium parity and Heavy -$3.30, but Bloomberg's Sep 29 document shows October term discounts deepened to -$34.50 (Medium) / -$37.00 (Heavy) vs benchmark, deeper than Aug-Sep. Brent settled $101.68 and WTI $90.23 on Oct 5, both lower; a Hormuz tanker was struck again on Oct 4 with war risk at 8x peacetime.

2026-10-05· 5 min· By: SNSUC Research Institute

I. Three-Layer Pricing Breakdown

OSP (official selling price): SOMO confirmed on Sep 13 that October Asia OSP was held unchanged - Basrah Medium at parity (0.00) to the Oman/Dubai average and Basrah Heavy at -$3.30/bbl, the stance after two consecutive months of upward revisions.

Spot / term discount (effective transacted allowance): A Bloomberg document dated Sep 29 shows October cargoes (loading Oct 1-31) were offered at discounts of -$34.50 (Medium) and -$37.00 (Heavy) to the destination benchmark (Oman/Dubai for Asia, Dated Brent for Europe, Argus Sour Crude Index for the Americas) - deeper than the below-$30 discounts of Aug-Sep, reflecting Iraq's price-for-volume strategy to defend market share amid Hormuz risk.

Loading premium / STS mechanism: Offshore STS transfers (Gulf of Oman) typically carry a +$3-8/bbl transfer premium; some delivered cargoes fetch Dubai +$10 or more; Qatar at +$6, ADNOC Fujairah STS at +$5-8.

II. Effective Net Discount Estimate

Asian buyers effectively receive a net discount to Oman/Dubai of about -$34.50 (Medium) / -$37.00 (Heavy). The modest OSP adjustment is offset by deeper term allowances, giving SOMO a sharp competitive edge versus comparable Middle East sour grades.

III. Macro & Geopolitics

Brent settled $101.68 (-0.86%) and WTI $90.23 (-0.88%) on Oct 5, edging lower on the week. OPEC+ held its output-rollback pace at its Oct 5 online meeting, planning a +137 kb/d hike for November; a coordinated G7/IEA release of 100 million barrels (50 Mbbl diesel + 50 Mbbl crude) capped Friday's gains.

IV. Strait of Hormuz

At 07:54 UTC on Oct 4, an IRGC drone/anti-ship missile damaged a tanker's engine room (Hamer Intel) - part of a recurring strike pattern; Iran asserts the strait stays closed until its seven conditions are met. War-risk premiums run at 8.0x peacetime, with single VLCC voyages quoted up to $2.5M (vs ~$125k peacetime); the Lloyd's JWC has listed the Arabian Gulf as a war zone, and ~80 Mbbl of crude is queued awaiting exit. Roughly 17-18 mb/d transits the chokepoint (about 1/5 of seaborne oil, 1/3 of seaborne-traded oil).

V. Practical Notes

Chinese refiners (Rongsheng, Shenghong, CNPC, etc.) have returned to Middle East spot tenders, securing Sep-Nov STS cargoes; onshore inventories stand at 1,172 Mbbl (~88 days). Buyers should embed war-risk and transfer premiums (+$3-8) into landed cost and prefer cargoes with escort/STS delivery routes, while verifying the OSP-to-term-discount spread on a cargo-by-cargo basis.

Sources: SOMO / Reuters / SquawkNews, Bloomberg (Argus-sourced), Kpler, Hamer Intel, World Oil Monitor, Jin10 / Huitong.

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