Recent analysis by Vortexa highlights an unprecedented crisis in Iraq’s oil balance, which is simultaneously pressured in the South by the closure of the Strait of Hormuz and in the North by the expiration of a critical bilateral agreement. The country’s production has plummeted to a decade low, making recovery entirely dependent on two separate geopolitical negotiations.
The blow in the South and the Strait of Hormuz
Iraq’s exclusive dependence on the Strait of Hormuz for exporting its Basra crude oil rendered the country extremely vulnerable after the closure of the Strait. The country’s seaborne exports collapsed to a historic low of 260 kbd (thousand /day) in May – just 8% of the 2025 average.
Conversely, regional players, such as Saudi Arabia and the UAE, maintained most of their exports, rerouting flows via pipelines or alternative maritime services. As a result, Iraqi production fell in April to 1.5 mbd (million /day), marking a 10-year low, with a slight recovery to 1.8 mbd in May, yet remaining well below OPEC quotas.
The mystery of the “gap” and inventories
Vortexa identifies a critical statistical discrepancy in the country’s balance. Specifically, the difference between officially reported production and actual seaborne exports tripled in the March-May period, reaching 1.3 mbd.
Under rational conditions, this surplus (non-exportable) production should be justified by domestic consumption, storage, or land exports. However, although domestic refineries operated at maximum capacity, they absorbed only a minimal percentage of the difference. At the same time, Iraqi inventories, instead of recording an increase – due to crude accumulation – shrank by 2.1 million barrels. Based on this, Vortexa concludes that the recorded production is fictitious and that Iraq has been forced into extensive, undeclared shut-ins of its oil wells.
The North at risk: The Kirkuk-Ceyhan pipeline
The crisis is exacerbated by the deadline of July 27, 2026, when the agreement for the Kirkuk-Ceyhan pipeline expires, following a termination notice issued by Ankara. The pipeline exported an average of 220 kbd. Now, Turkey is demanding a broader framework of multiple energy products (oil, natural gas, electricity) and the offsetting of the international arbitration fine ($1.47 billion) imposed on it. A failure to renew will deprive Baghdad of a critical portion of its remaining revenues.
Alternative solutions and outlook
In the short term, crude transport by truck via Syria to the port of Baniyas (approximately 130 kbd in mid-June) was deployed, although this agreement may expire soon. In the long term, the answer is the planned Basra-Haditha pipeline (capacity 2.5 mbd), approved in 2024, which will bypass Hormuz by connecting the South to the Mediterranean and the Red Sea.
According to Vortexa, exports in the coming months will be determined by transits through Hormuz. If, however, an agreement with Turkey is not reached by July 27, the loss of the northern corridor will dramatically worsen the deadlock, forcing Iraq to accelerate land transport and the construction of new infrastructure.
