Iraq's State Oil Marketing Organisation (SOMO) has finalised its term contract to buy over 1.5 million tonnes of gasoil for 2014 from oil traders Vitol and Glencore, industry sources said on Wednesday.

The company will buy four cargoes of 500 ppm sulphur gasoil from Vitol and three cargoes of the same product from Glencore for delivery into Khor Al-Zubair Terminal over January to December next year, they said.

SOMO will pay a premium of $7.37 a barrel over Middle East quotes on a cost, insurance and freight (CIF) basis for the cargoes, they added.

This is slightly lower than the $7.99-a-barrel premium it paid for up to 1.097 million tonnes of gasoil for this year's term contract, traders said.

Iraq lacks crude oil refining capacity and suffers from a chronic shortage of electricity. It uses gasoil to generate power.

Years of war, militant attacks, and under investment have forced Iraq to rely on imports for its fuel needs, making it one of the biggest buyers of gasoline and gasoil in the region.