SOMO IS MOVING TOWARDS GLOBAL OIL TRADING.
The Iraqi Oil Marketing Company (SOMO) is moving towards a qualitative shift in its operations, from simply selling crude oil through traditional outlets to entering the field of trading in global oil markets. The company’s management described this move as aiming to maximize revenues and seize opportunities in a rapidly fluctuating market, while oil experts warned of the risks of this step if the appropriate institutional and legal environment is not prepared for it.
The Director General of the Oil Marketing Company, Ali Nizar Al-Shatri, told Al-Sabah that the company is currently studying mechanisms for transitioning from the traditional sales model to a trading model, in line with Iraq’s economic interests, noting that this approach comes within a vision aimed at maximizing oil revenues and not limiting marketing operations to Iraqi ports only.
Al-Shatri explained that the company seeks to enter into positive partnerships with reputable international companies that have extensive experience in the field of oil trading, indicating that the latest of these moves was the negotiation with the global company “ExxonMobil”, to enter into an advanced commercial partnership that contributes to developing the staff of “SOMO”, and building a marketing and commercial arm capable of interacting with the changes of the global market and seizing the available opportunities.
He pointed out that global oil markets suffer from clear weaknesses in some of their joints, but SOMO is working to invest in the available strengths through these partnerships, enabling it to move from the role of seller to a more effective player in the international oil trading system.
Conversely, experts believe that this shift, despite its importance, requires extreme caution and well-considered measures. Oil expert Yahya Nasser Al-Aqabi emphasized that SOMO’s transition from traditional sales to trading in global markets is not merely an administrative step, but a sovereign decision with significant implications for state revenues and financial sustainability.
Al-Aqabi explained that the current sales model adopted by SOMO is based on selling oil from Iraqi ports at prices linked to global indicators, with relatively limited exposure to risks, while entering the field of trading represents a completely different activity, requiring independent institutions with strict systems and expert management capable of dealing with price fluctuations and market risks.
He added that SOMO, as a company affiliated with the Ministry of Oil, may not currently possess all the institutional capabilities necessary to undertake this type of complex activity, warning that any ill-considered step could be fraught with risks. He cited the experiences of oil-producing countries and national oil companies belonging to OPEC member states, where success was achieved when independent commercial arms were established under clear oversight and professional management.
Al-Aqabi stressed the need for any such transformation to be gradual and deliberate, starting with limited steps whose results are carefully evaluated, before moving to a wider scope. He pointed out that any serious project in this direction needs financial and administrative independence, and a complete separation between political decision-making and commercial activity, warning that ambitions not supported by building strong institutions may turn from a tool for maximizing revenues into a gateway to losses.
For his part, oil expert Kovind Shirwani warned of the risks of SOMO entering the oil speculation market, especially with regard to forward contracts, considering that this step could constitute a major gamble for a government company suffering from red tape and bureaucracy.
Sherwani explained that speculative activity is mostly suitable for private trading companies, or speculators who have high flexibility in decision-making, even if they do not have great financial efficiency, but the entry of a large government institution like “SOMO” into this field requires double caution, especially in light of the current indicators that point to a relative weakness in the global oil market.
He stressed that any move towards trading must be preceded by comprehensive preparation and a careful study of potential risks, in order to avoid exposing oil revenues, which form the backbone of the Iraqi budget, to unforeseen fluctuations.
While this step represents a legitimate ambition to maximize state resources, its success remains contingent on Iraq’s ability to build flexible, independent oil institutions governed by strict governance systems that ensure revenue protection and financial sustainability, away from reckless adventures.