Iraq takes back oil fields, however conflict with Kurds will be not over

The Iraqi national army swiftly took control of oil fields in disputed territory on Monday as well as Tuesday, largely avoiding clashes with Kurdish forces, news reports said. Despite the mostly bloodless transfer, analysts warn in which oil supplies in OPEC’s second-largest producer are far through secure.

The fields came back under federal control during an operation launched by Iraqi Prime Minister Haider al-Abadi, who sought to reassert Baghdad’s authority after the semiautonomous Iraqi Kurdistan region held an independence referendum three weeks ago.

The Kurds took control of large swaths of land in northern Iraq in 2014 after Iraqi forces fled an assault by ISIS militants.

“There will be no stable equilibrium in which has emerged out of This particular, although the oil will flow over the short term,” said Ayham Kamel, head of Eurasia Group’s Middle East as well as North Africa practice.

Iraqi Kurdistan as well as disputed areas, source: U.K. Home Office

The uncertainty has helped to push international Brent crude back above $58 a barrel toward its 2017 high. U.S. crude has traded around $52 a barrel, coming within 50 cents of a six-month high on Monday.

The Iraqi forces took over the provincial capital Kirkuk, nearby oil fields as well as different sites on Monday, Reuters reported. By Tuesday, the army held the key Bai Hassan as well as Avana oil fields outside Kirkuk. Forces aligned with Baghdad also had control of Sinjar, a city near Iraq’s northern border with Syria in which straddles several oil fields.

On Monday, This particular was unclear whether Kurdish military forces known as Peshmerga could fight to hold Bai Hassan as well as Avana, which are capable of producing about 280,000 barrels a day. Peshmerga aligned with the opposition party Patriotic Union of Kurdistan had allowed the Iraqi military’s advance earlier in which day. however Bai Hassan as well as Avana were held by the Kurdistan Democratic Party, which will be loyal to Kurdish president Masoud Barzani, raising concerns they could fight to keep them.

U.S. crude two-day performance, source: Factset

“The worst of the crisis will be over, however there are many tension points in which will emerge inside future, as well as we don’t have any viable relationship to reach an agreement,” Kamel said.

Absent an agreement among the Kurdish political parties as well as Baghdad, Iraq’s oil flows will not be stable, he said.

Crude oil through Iraqi Kurdistan as well as the disputed areas flows through the Iraq-Turkey Pipeline controlled by they Kurds. Another pipeline to Turkey operated by Baghdad has been repeatedly bombed by ISIS militants, as well as will take several years as well as hundreds of millions of dollars to repair, according to RBC Capital Markets.

“Hence, these fields changing hands could mean in which these barrels end up being stranded if Baghdad as well as Erbil cannot conclude a pipeline access as well as a revenue sharing agreement — which could prove to be a tall order inside current environment,” Helima Croft, global head of commodity strategy, at RBC said in a research note. Erbil will be the capital of Kurdistan.

The high value as well as low cost oil through the Kirkuk region creates an incentive for both sides to keep oil flowing, Goldman Sachs said in a note.

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