Turkish Delight: New Developments In Crude Oil Flows In The Mediterranean

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  • The potential reopening of the Kirkuk-Ceyhan pipeline could change the dynamics of crude oil flows in the Mediterranean region.
  • However, political challenges persist with the Kurdistan Regional Government (KRG) pipeline, which remains offline.

Reopening the Kirkuk-Ceyhan Pipeline

The Iraqi government plans to repair and reopen the 350,000 barrels per day (kbd) Kirkuk-Ceyhan pipeline, which has been out of action since 2014 due to attacks by ISIS. The anticipated restart by the end of April, pending the completion of work on storage and pumping facilities, is a positive development for crude oil flows in the Mediterranean.

Challenges with the KRG Pipeline

Negotiations to restart the 450 kbd KRG pipeline have faced significant delays due to ongoing political tension between the Federal Iraqi Government, the autonomous Kurdistan Regional Government, and Turkey. This has hindered the resumption of crude oil flows from Northern Iraq to the Turkish port of Ceyhan, impacting the tanker market.

Impact on Tanker Markets

The loss of approximately 400 kbd of exports from Ceyhan has affected the Aframax sector, reducing crude cargo supply in the Mediterranean and prompting owners to seek opportunities elsewhere. The return of crude oil exports via the Kirkuk-Ceyhan pipeline could benefit the Mediterranean Aframax sector, providing new opportunities and supporting cross-Mediterranean rates.

Outlook for the Future

The potential revival of Iraq’s crude oil exports via northern pipelines could affect the country’s southern ports’ export levels to comply with OPEC production quotas, potentially impacting the Arabian Gulf tanker market. Additionally, competition from Russian-affiliated vessels leaving the Urals trade may moderate gains in the Mediterranean

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Source: Gibson