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. Last Updated: 07/27/2016

Iraq Blames Oil Client Exodus on UN Policy

DUBAI, United Arab Emirates -- Iraq said its oil exports had ground to a halt on Monday and blamed a United Nations retroactive price policy for driving away its customers.

"There is nothing loading today and it is all because of the UN's retroactive pricing," a senior Iraqi oil official said. "The situation is very serious. Our customers cannot load their oil without knowing the price."

The official said the last ship to load left the Turkish port of Ceyhan on Sunday. He was hopeful a tanker would arrive Tuesday to load again at Ceyhan.

But Western industry sources were less optimistic, saying a vessel was not expected at Ceyhan until late this week, while the Mina al-Bakr terminal could sit idle until next week. Exports at Iraq's Gulf terminal wound down Saturday.

The total break in exports comes just days into a new six-month phase of the UN oil-for-food deal.

Iraq -- which just celebrated the 30th anniversary of the nationalization of its oil sector -- has warned that UN oil sales, which ran at 1.5 million barrels per day in the second half of May, could drop sharply in June due to the retroactive policy.

Under the UN policy, prices are set after oil loads in a bid to ensure fair market value and eliminate the ability to pay alleged illicit fees.

Baghdad has long complained that retroactive pricing, initiated by Washington and London, has cut export flows by at least 500,000 bpd from capacity of 2.2 million bpd.

Oil traders are also reluctant to rush for cargoes given rising speculation that Baghdad may be about to abandon its demand for an illicit surcharge.

"There is rumor upon rumor about Iraq dropping the fee," said an oil executive. "People are reluctant to load today when they might find their cargo is 25 to 30 cents cheaper tomorrow."

Pressure is mounting on Iraq to ditch its 18-month surcharge fee, as UN officials say the oil-for-food program is more than $2 billion in arrears and customers appear fed up with retroactive pricing and on-off supplies.

The stop-start nature of Iraqi oil sales has forced refiners to look for alternative supplies, especially from Russia and Syria, market sources said.

"Iraq is finding out its crude isn't needed," said a trader. "They'll have to force their barrels back into the market."