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Tensions in Iraq, and between US and Iran Threaten Global Oil Production

By Patrick Higgins  |  17/10/2017 15:43
The Iraqi army recaptured the oil-rich city of Kirkuk from the Kurdish Peshmerga forces yesterday. Reports emerged that as the Peshmerga retreated, they sabotaged the region’s oil production resulting in up to 350,000bpd. Though it was reported that production had since resumed, the shutdown was critical in the region, where typical production levels hover at 500,000bpd.

The city, while normally under the control of the Iraqi government, had been occupied by the Kurds since the near-collapse of the Iraqi society during the Islamic State uprising in 2014. The move to recapture Kirkuk came in the weeks after the Kurdish independence referendum, where the citizens of Kirkuk were allowed to take part.

On the opposite side of the globe, Donald Trump refused to sign off on Iran's compliance level, which concerned the nuclear deal this past friday. Trump then shifted the focus over to congress, tasking them with the decision to terminate the agreement or not. Trump also tasked congress with the decision to order new sanctions on Tehran. In this case, production levels of up to hundreds and thousands of bpd could be affected. In previous years, sanctions against Iran have directly cut off over a million barrels from the global energy market.

The Ceyhan pipeline, Kurdistan, is now potentially at risk. The high tension between Iran and the US means that it’s likely renewed economic sanctions will also have a massive impact on the global oil supply. If this wasn’t ominous enough, OPEC is still maintaining its production cuts long into next year.

On a more positive note, US shale producers just announced a projected 82,000 bdp increase in November.

WTI was trading $51.78 yesterday, down from a high of $52.37. It’s up today, currently trading at $52.11. Brent closed at £57.84, down from a high of $58.47.

Today it’s traded at $58.02

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