As Goldman noted overnight, the bank had received quite a few inbound client inquiries as to what may be behind the recent jump in crude oil prices which after tumbling to the lowest level since 2021 have rebounded back to almost $80/bbl. One answer may come from the semi-autonomous Kurdistan region of northern Iraq, where producers have shut in or reduced output at several oilfields following a halt to the northern export pipeline, company statements showed, with more outages on the horizon.
Iraq was forced to halt around 450,000 barrels per day of crude exports, or half a percent of global oil supply, from the Kurdistan region (KRI) on Saturday through a pipeline that runs from its northern Kirkuk oil fields to the Turkish port of Ceyhan, Reuters reported.
Turkey stopped pumping Iraqi crude from the pipeline after Iraq won an arbitration case in which it said Turkey had violated a joint agreement by allowing the Kurdistan Regional Government (KRG) to export oil to Ceyhan without Baghdad’s consent.
Iraq’s government said it’s up to Kurdistan to break the oil deadlock. “The ball now is the Kurds’ court,” Asim Jihad, a spokesman for Iraq’s Federal Ministry of Oil, said in an interview.
Meanwhile, oil firms operating in the KRI are being forced to halt output or move production into storage, which many say will reach capacity within days, as talks drag between Turkey, Baghdad and the KRG to resume exports.
Norwegian oil firm DNO said on Wednesday it had begun shutting down production at its Tawke and Peshkabir fields, where production averaged 107,000 barrels per day (bpd) last year. This represents a quarter of total Kurdish region exports, DNO said.
Genel Energy, a partner in the fields, said: “Peshkabir production was halted last night and plans drawn up to conduct deferred maintenance. Tawke production shutdown has started but will take an additional day or so.” Genel Energy’s remaining assets in KRI continue to flow into storage, the firm said. Production from its Sarta field can flow into storage until the end of the week, while tanks can hold production from Taq Taq until around April 21, a company spokesperson said on Wednesday. The fields produced a respective 4,710 bpd and 4,490 bpd last year.
Canada-based Forza Petroleum, formerly Oryx Petroleum Corp, was forced to shut in production earlier this week from the 14,500 bpd Hawler license, which produced an average 13,700 bpd in January and February.
Gulf Keystone has reduced production at the Shaikan oil field, which previously produced around 55,000 bpd, and said on Monday it would suspend production after a few days. The company declined to comment on current production levels.
Dallas-based HKN Energy, which operates the Sarsang block, said on Monday it would shut in operations “within a week if no resolution is reached” as its storage facilities approach capacity. The block produced 43,048 bpd in the fourth quarter of last year.
In response, the White House – which has been paranoid about even one drop of oil not hitting the global market on time – is pushing Iraq and Turkey to restart exports of crude oil and to resolve a dispute with Kurdish authorities as soon as possible, because the last thing Biden needs in addition to a bank crisis and deposit runs is another surge in gasoline prices.
And while the Turkey-Iraq spat has taken off almost half a million barrels off the market, and pushed the price of Brent higher, the question is how long before CTAs – which are massively short oil – start to cover. As Goldman calcualted yesterday, “systematic positioning here leans short (went from short $10bn in energy before Feb 22 to now being short $30bn). Cot data re-affirming the above, with positioning coming in from late Feb/early-March highs.” A condition projection of CTA activity in oil shows massive buying in the coming weeks should the price of oil turn higher, creating a positive feedback loop of more buying and more short covering.
Tyler Durden
Wed, 03/29/2023 – 18:40
