To add details and background

From Ahmed Rashid

Baghdad, March 31 (Reuters) - Energy officials and a document from Iraq's State Oil Marketing Organization (SOMO) seen by Reuters indicate that the company has signed contracts to supply around 650,000 tons of fuel oil per month from April to June, to be transported overland through Syria.

Iraq has not used the land route for decades, but two informed sources said that the end of the civil war in Syria, in addition to the unprecedented turmoil caused by the war with Iran, now makes this route the best option, despite its high cost.

The two sources said the first convoy of shipments began its journey through Syria on Tuesday.

Limited-term contracts were signed with four Iraqi oil traders after the United States and Israel launched attacks on Iran at the end of February, effectively closing the Strait of Hormuz.

The Iraqi oil marketing company did not immediately respond to a request for comment.

* Decreased production and full storage tanks

Oil-producing countries, such as Iraq, have reduced their production as storage tanks fill up due to shipping difficulties.

Three Iraqi energy officials said that production at key oil fields in southern Iraq has fallen by about 80 percent to around 800,000 barrels per day.

None of the sources were named because they were not authorized to speak publicly.

Before the disruptions caused by the war with Iran, Iraq exported its oil mainly through the port of Khor al-Zubair on the Gulf, using sea routes to reach international markets.

Transporting fuel by land is more expensive and operationally complex than using oil tankers, but Iraq has no other option.

A document from the Iraqi Oil Marketing Company showed that two traders would import 720,000 tons of high-sulfur fuel oil over three months, distributed equally between Iraq’s northern, central and southern refineries, at discounts estimated at between $160 and $170 per ton.

A third trader will export 401,000 tons during the same period at a discount of about $160 per ton, while a fourth contractor secured a smaller contract to export 90,000 tons at a discount estimated at about $155 per ton.