Drone Strikes Cripple Oil Production Infrastructure In Iraq’s Kurdistan
Several oilfields operated by foreign companies in Iraq’s semi-autonomous region of Kurdistan have halted production in the past few hours following attacks with explosive-laden drones on infrastructure at the fields. On Tuesday, a drone attack forced the suspension of production at the Sarsang oilfield, operated by a U.S. privately held firm, HKN Energy. The attack took place hours before HKN Energy signed a preliminary agreement with the Iraqi oil ministry to develop another oilfield. HKN Energy confirmed production at Sarsang has been suspended, but noted that all personnel have been safely accounted for. The attacks continued on Wednesday morning local time, with explosive-laden drones hitting oilfields operated by Norwegian firm DNO and U.S.-based Hunt Oil Company, Kurdistan’s counter-terrorism services said. DNO announced on Wednesday that operations at its Tawke field in Kurdistan have been temporarily suspended following three explosions early this morning, one involving a small storage tank at Tawke and another involving surface processing equipment at Peshkabir. There have been no injuries. The damage assessment is underway, and the company expects to restart production once said assessment is completed.
However, Kurdistan security sources told Reuters that initial investigations suggested the drone came from areas controlled by Iran-backed militias.
The oil production halt comes as the federal government in Baghdad and the regional Kurdish government in Erbil continue to quarrel over who should be responsible for the oil exports and the subsequent revenue distribution.
Oil Rises on Tight Supply Signals
Oil rose amid signs of tighter supplies in the near term and on stronger demand signals in the US. Prices also found support from indications of a tighter near-term physical crude market on Thursday. US crude inventories slid last week and Iraq has lost about 200,000 barrels a day of oil production due to drone attacks on several fields in Kurdistan. Chevron Corp. said it was on the cusp of reaching a production plateau in the largest US oil field. “While inventories globally have built very significantly, stocks in the pricing centres – especially in the US – are still quite low,” Daan Struyven, head of oil research at Goldman Sachs, said on Bloomberg Television. Market focus has shifted to “downside risks to supply,” he said. Limiting the rally, Iraq approved a plan for its semi-autonomous Kurdish region to resume oil exports that have been halted since March 2023. The Kurdistan Regional Government will supply Iraq’s state oil marketer SOMO at least 230,000 barrels a day for export, the federal government said. Supply concerns were also reflected in the forward curve for crude. It is currently trading in backwardation, where a premium is paid for sooner delivery over longer-dated contracts.
In the US, distillate stockpiles remain at the lowest seasonal level since 1996 even after last weeks increase.
NN: A big oil shock is coming. Pod Cast: