• 2 days Iraq Begins To Rebuild Largest Refinery
  • 3 days Canadian Producers Struggle To Find Transport Oil Cargo
  • 3 days Venezuela’s PDVSA Makes $539M Interest Payments On Bonds
  • 3 days China's CNPC Considers Taking Over South Pars Gas Field
  • 3 days BP To Invest $200 Million In Solar
  • 3 days Tesla Opens New Showroom In NYC
  • 3 days Petrobras CEO Hints At New Partner In Oil-Rich Campos Basin
  • 3 days Venezuela Sells Oil Refinery Stake To Cuba
  • 3 days Tesla Is “Headed For A Brick Wall”
  • 3 days Norwegian Pension Fund Set to Divest From Oil Sands and Coal Ventures
  • 4 days IEA: “2018 Might Not Be Quite So Happy For OPEC Producers”
  • 4 days Goldman Bullish On Oil Markets
  • 4 days OPEC Member Nigeria To Issue Africa’s First Sovereign Green Bond
  • 4 days Nigeria To Spend $1B Of Oil Money Fighting Boko Haram
  • 4 days Syria Aims To Begin Offshore Gas Exploration In 2019
  • 4 days Australian Watchdog Blocks BP Fuel Station Acquisition
  • 4 days Colombia Boosts Oil & Gas Investment
  • 4 days Environmentalists Rev Up Anti-Keystone XL Angst Amongst Landowners
  • 5 days Venezuelan Default Swap Bonds At 19.25 Cents On The Dollar
  • 5 days Aramco On The Hunt For IPO Global Coordinators
  • 5 days ADNOC Distribution Jumps 16% At Market Debut In UAE
  • 5 days India Feels the Pinch As Oil Prices Rise
  • 5 days Aramco Announces $40 Billion Investment Program
  • 5 days Top Insurer Axa To Exit Oil Sands
  • 6 days API Reports Huge Crude Draw
  • 6 days Venezuela “Can’t Even Write A Check For $21.5M Dollars.”
  • 6 days EIA Lowers 2018 Oil Demand Growth Estimates By 40,000 Bpd
  • 6 days Trump Set To Open Atlantic Coast To Oil, Gas Drilling
  • 6 days Norway’s Oil And Gas Investment To Drop For Fourth Consecutive Year
  • 6 days Saudis Plan To Hike Gasoline Prices By 80% In January
  • 6 days Exxon To Start Reporting On Climate Change Effect
  • 6 days US Geological Survey To Reevaluate Bakken Oil Reserves
  • 7 days Brazil Cuts Local Content Requirements to Attract Oil Investors
  • 7 days Forties Pipeline Could Remain Shuttered For Weeks
  • 7 days Desjardins Ends Energy Loan Moratorium
  • 7 days ADNOC Distribution IPO Valuation Could Be Lesson For Aramco
  • 7 days Russia May Turn To Cryptocurrencies For Oil Trade
  • 7 days Iraq-Iran Oil Swap Deal To Run For 1 Year
  • 9 days Venezuelan Crude Exports To U.S. Fall To 15-year Lows
  • 9 days Mexico Blames Brazil For Failing Auction

Breaking News:

Iraq Begins To Rebuild Largest Refinery

Alt Text

Will Libya Be First To Ditch The OPEC Production Deal?

Almost two weeks after pledging…

Alt Text

Moscow Braces For More U.S. Sanctions

Amid growing concerns over Ukraine…

Alt Text

Fear Will Drive Oil Prices Higher In 2018

Oil prices are governed by…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

Iraq Conflict Won’t Trigger Oil Rally


The standoff between the Iraqi government and Kurdistan over the past month helped push up oil prices, due to the idling of a sizable portion of the country’s crude oil exports. But Iraq probably won’t be the spark that starts a new bull run for crude oil.

The seizure of the Kirkuk oil fields a few weeks ago, coming on the heels of the Kurdish referendum for independence, led to a temporary sidelining of some 400,000 bpd. The oil fields near Kirkuk—the Bai Hassan and Avana fields—are still reportedly not exporting crude, but that could soon change.

In a humiliating climbdown, the Kurdistan Regional Government (KRG) has proposed a ceasefire with Baghdad, offering to freeze the results of the independence referendum. It’s largely an admission of defeat for the semi-autonomous region in Iraq—a recognition that the drive for independence has backfired.

Kurdistan has become internationally isolated and has antagonized not just Baghdad, but also its neighbors in Turkey and Iran. Worse, without the Kirkuk oil fields, Kurdistan would never have the revenue base upon which it could build an independent nation. With few friends, and the loss of the oil fields, the KRG has few cards left to play.

That led it to seek an accord with Baghdad. And that means that Iraq probably won’t be the bullish catalyst for the oil market, because the outage in the northern part of the country will almost certainly be temporary. Already, there are reports that exports from Kirkuk and Kurdistan have increased to 300,000 bpd, up from 200,000 bpd a few days ago.

Related: Kurdistan Proposes Immediate Ceasefire With Iraq

Those volumes could rise substantially in the near future. Bloomberg reports that Iraq’s North Oil Company, under the control of the central government, is cooperating with the Kurdish Kar Group to resume production and export at the two oil fields, Bai Hassan and Avana. The two fields combined represent 275,000 bpd of production. Kar Group also operates the pipeline that runs from Kurdistan to Turkey, a conduit that was constructed a few years ago to bypass the pipeline owned by Baghdad.

The fact that the Iraqi and Kurdish companies are working together suggests that full production could soon be restored.

As such, the bullish effect on the market from Iraq could be fleeting. The case for higher oil prices was predicated on Baghdad and Erbil heading for a lengthy and potentially violent standoff. With the pipeline controlled by the Iraqi government still unrepaired after suffering damage from ISIS years ago, oil flows will need to continue to run through the Kurdish pipeline. That means that some sort of cooperation from the KRG is necessary. If the KRG is essentially laying down arms, there is a much smaller chance of an outage at the country’s oil fields.

Moreover, the outages in Iraq’s north were always going to be capped at 600,000 bpd, even in the worst-case scenario. That represents the volume that is sent through the pipeline to Turkey for export. On the other hand, the vast majority of the country’s output comes from the massive oil fields in the south near Basra, where international firms—BP, ExxonMobil, CNPC, Lukoil, to name a few—help produce more than 3 million barrels per day. The Basra fields are far from the conflict zone in the north.

Iraq made some moves in recent days to step up crude shipments through the Persian Gulf in order to offset the outage in Kirkuk. Iraq opened up a new loading point on its southern coast, a move that the country’s oil minister said would allow for an additional 200,000 bpd of exports. “The government started the [new loading point] earlier than planned because they want to raise exports from Basrah to compensate for the losses at Kirkuk,” Jaafar Altaie, managing director at Abu Dhabi consulting firm Manaar Group, told Bloomberg.

Related: Which Of These 3 Hotspots Will Be The Next Big Thing In Oil?

Meanwhile, across the border in Syria, U.S.-backed forces reclaimed control of Syria’s largest oil field from ISIS militants, who held the field since 2014. It’s a pittance in the context of the global market, but the 30,000 bpd will no longer be under control of ISIS. The recent ouster of ISIS from its de facto capital in Raqqa also bodes well for improving security in the region.

The pending ceasefire that could emerge between Kurdistan and Baghdad offers some hope that violence could be averted. However, the conflict is too complex to hope that it will be resolved anytime soon. The Center for Strategic and International Studies proposed a revenue sharing agreement that would consist of making Kirkuk and its surrounding oil fields a “neutral zone,” along with an agreement to jointly manage the oil fields.

This sort of approach is far from assured, and would likely take time to implement. Conflict could still reignite at any time. But for now, the ceasefire offered by the KRG is a strong indicator that the recent outages in northern Iraq have likely peaked.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:

Back to homepage

Leave a comment
  • Joseph Snorkel on October 25 2017 said:
    Iraq is clamping down and will take the Kirkuk region's oil off the market to keep compliance with OPEC limits.

    I personally would be concerned, there's a lot of guns and bad blood in the region. To say things are fine in Northern Iraq is like saying Kim Jong Un has been nominated for the Nobel peace prize.
  • Johnny on October 27 2017 said:
    The truth is quite different.Oil from Kirkuk was underpriced and was selling on much lower price,especially to Turkey and Israel and others.Everybody knows that.Looks like no more discounts.

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News