Iraqi federal government and Kurdish officials failed to agree on the resumption of around 400,000 barrels a day of oil exports from a Turkish port, according to people familiar with the matter.
Last week’s halt — part of a legal dispute between Iraq, its semi-autonomous region of Kurdistan and Turkey — may push global oil prices higher if shipments from Ceyhan don’t resume in the coming days, according to Saxo Bank strategist Ole Hansen.
The shares of DNO ASA and Genel Energy Plc — two of the biggest oil producers in Kurdistan — slumped on Monday by around 10%, while Brent crude extended gains from last week.
Iraqi and Kurdish officials met on Sunday in Baghdad and didn’t achieve a breakthrough on restarting flows, according to two people familiar with the matter. The Kurdish delegation left Baghdad the same day and there’s no follow-up meeting scheduled, they said.
Baghdad won an arbitration case against Turkey last week at the Paris-based International Chamber of Commerce. The Iraqi government had argued that Turkey should not allow Kurdish oil to be exported from Ceyhan without Baghdad’s approval.
The case was part of Iraq’s long-running attempts to gain more control over crude flows from the Kurdish region in the north of the country.
Oil is the lifeblood of Kurdistan’s economy, accounting for more than half the government’s revenues and helping finance its bid for independence. Baghdad has stepped up efforts in the past year to stop the region selling oil independently, including by warning buyers they face legal action. Those moves have caused Kurdish oil prices to drop.
The Kurdistan Regional Government sends around 350,000 barrels a day of crude to Ceyhan via a pipeline, which Turkey shut following the ICC ruling. The federal government exports 70,000 barrels a day though the same line. Iraq’s overall daily production is almost 4.5 million barrels, most of them shipped abroad from southern terminals near Basra.
Norway’s DNO said it started diverting crude from the Tawke and Peshkabir fields in Kurdistan to storage tanks on March 25 and that they have enough space only for “several days’ production.”
“DNO notes from public reports that authorities in Ankara, Baghdad and Erbil are in discussion to reach agreements that will allow oil exports to resume,” the company said.
Genel, which is also sending oil to storage tanks, said that statements from government officials led it to think the shut-in will be temporary.
The KRG’s prime minister, Masrour Barzani, on Saturday said that “our recent understandings with Baghdad have laid the groundwork for us to overcome the arbitration ruling.”
Ceyhan also handles more than 500,000 barrels a day of Azeri oil, which are unaffected by the dispute involving Iraq and Turkey. Loadings at the Mediterranean port were briefly interrupted in February after two devastating earthquakes in eastern Turkey.
Brent rose 1.2% to $75.90 a barrel as of 12:15 p.m. in London, though its still down 12% this year largely because of the fallout from the US and Europe’s banking crisis.
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