After 2.5 years, Kurdish crude has been flowing once again. In its latest weekly report, shipbroker Gibson said that “Saturday saw the resumption of Kurdish crude flows through the Kirkuk-Ceyhan pipeline after a halt of two-and-a-half years, with initial flows set at 150-160 kbd. Already a tanker is on the berth at Ceyhan, loading Kurdish crude for the first time since the pipeline was halted. The pipeline was halted in March 2023 after Turkey was ordered to pay Iraq $1.5 billion in damages for unauthorised exports by the International Chamber of Commerce. Last week a deal was reached between Iraq’s federal government, the Kurdistan regional government, and foreign oil producers, breaking the deadlock. The crude will be sold using Iraq’s SOMO’s official prices and an independent trader will handle sales. As SOMO is handling the volume, it may mean there is no longer any barrier for owners to load both Kurdish crude at Ceyhan and Iraqi crude in the AG”.
According to Gibson, “exports of Kurdish crude from Ceyhan used to average over 400 kbd prior to March 2023, over half of which was carried on Aframaxes, with the rest carried on Suezmaxes. By far most of this medium sour grade crude was delivered into the Mediterranean region, with a varying share heading to Eastern Asia, depending on arb economics. The additional availability of crude in the Mediterranean may open arb opportunities to the East on Suezmaxes, adding to tonne miles. On the flip side, demand for Middle Eastern barrels may decline”.
The shipbroker added that “with volumes set at 150-160 kbd for now, significant headroom remains for further upwards increases, especially as the pipeline offers improved export economics for crude suppliers. Reportedly, SOMO is aiming for 400 to 500kbd of flows through the pipeline by 2026. Iraq has been a serial overproducer against its OPEC+ quota and a potential increase in production to facilitate higher flows through the Kirkuk-Ceyhan pipeline could lead to further breaches. However, some producers have said they have no immediate plans to resume exports through the pipeline. There is still $1bn in arrears owed to producers, and the oil companies involved are reported to be in the process of creating a mechanism for settling the outstanding debts”.
“The resumption of Kurdish flows through the Kirkuk-Ceyhan pipeline will come as welcome news to the Aframax and Suezmax markets. Suezmaxes have already enjoyed significant strength throughout the summer. In the West, Suezmax demand was supported by continued strong CPC exports, as well as growing volumes from Latin America, with open arbs to the East supporting tonne miles. In the East, higher OPEC+ volumes have provided support. Aframaxes have recently traded at a sharp discount to the larger Suezmaxes and VLCCs. Various factors are impacting upon Aframax demand, as discussed in our recent report. The prospect of additional barrels and an uplift from the impending winter season should provide hope for owners that things are about to turn a corner”, Gibson concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
