After two and a half years of inactivity, the Kirkuk-Ceyhan oil pipeline was put back into operation after an agreement was reached between the government of Iraq, the regional government of Kurdistan and eight international oil companies.
This development was welcomed with “open arms” by tankers, which will “see” an additional 150,000-160,000 barrels of crude oil flowing into the market during the initial phase of the pipeline’s reactivation. It is worth noting that Kurdish oil exports from Ceyhan averaged 400,000 barrels per day until March 2023, of which over 50% were transported via Aframaxes and the remainder via Suezmaxes. Also, the lion’s share of these exports was directed to the Mediterranean.
Therefore, an increase in the availability of crude in the Mediterranean is expected soon, which could create arbitrage opportunities eastwards, which would exert upward pressure on tanker freight rates. In contrast, demand for oil from the Middle East may slow down.
In any case, the reactivation of the Kirkuk-Ceyhan pipeline is expected to have a positive impact on Aframax and Suezmax tankers. After all, crude flows through the pipeline are predicted to accelerate gradually, with the Iraqi oil company SOMO aiming for exports of 400,000-500,000 barrels per day by 2026.
Source: Gibson
