Turkey Inches Closer To Disrupting Kurdish Oil Exports

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Turkey supports Iraq’s decision that the oil trade should be done only by the central government, reaffirming it will deal only with Baghdad, in a move that could disrupt or totally cut off crude oil exports from the Kurdistan region after it voted for independence earlier this week.

The office of Iraqi Prime Minister Haider al-Abadi has said that Turkish Prime Minister Binali Yildirim told al-Abadi in a phone call that Ankara will deal only with Iraq’s central government regarding oil trades, Reuters reports.

“Mr. Yildirim also stressed his country’s support for all other decisions, including the export of oil should be through the federal authorities,” al-Abadi’s office said in a press release on Thursday, referring to the phone call.

Kurdistan produces around 600,000 bpd of crude oil, or about 15 percent of Iraq’s total output. Turkey is crucial to Kurdistan’s oil exports to the world, because most Kurdish oil is moved through a pipeline to the Turkish port of Ceyhan.

Turkey has the largest Kurdish population in the region and sees the referendum as a serious matter for its own security.

On Sunday, a day before the vote in Kurdistan, the central government of Iraq issued a statement calling on “neighboring countries and countries of the world” to stop buying crude oil directly from the Kurdistan Autonomous Region and only deal with Baghdad.

While the vote was underway on Monday, Turkish President Recep Tayyip Erdogan said that Turkey could cut off the crude oil flow from Kurdistan, putting further pressure on Kurdistan over what Ankara sees as an illegitimate separatist vote.

Related: NatGas Prices Aren’t Going Anywhere Fast

The Kurdistan Regional Government said on Thursday that ‘Yes’ wins by 92.73 percent at the independence referendum.

Iraq, Turkey, and Iran strongly oppose the vote, while Western Europe and the U.S. were also against Kurdistan holding the vote, because it could further destabilize the region and distract from efforts to defeat ISIS.

On Monday, Turkey’s threat to turn off the tap on Kurdish oil sent WTI prices to a seven-month high, and Brent crude at the highest level since July 2015.

At 11:07am EST on Thursday, WTI was up 0.54 percent at US$52.42, while Brent was trading up 0.63 percent at US$57.93, amid rising tensions over Kurdistan and after the EIA reported yesterday a 1.8-million-barrel decline in U.S. commercial crude oil inventories.   

By Tsvetana Paraskova for Oilprice.com

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