Industry Trend Analysis - Quick View: Oil Leverage Threat On 'Yes' Vote - NOV 2017

The Latest: The Kurdistan Regional Government (KRG) has backed a referendum on independence from Iraq, due to take place on September 25. The Iraqi Supreme Court has ordered the suspension of the referendum, while the majority of the international community is opposed also opposed to the referendum. At the time of writing, the KRG has not backed down from its position.

Implications On The Oil Market: The immediate impact of the referendum on the market will likely be marginal given the global market is currently well supplied and we do not expect any processes to initiate the secession of Kurdistan following the vote. According to our estimates, less than 12% of Iraq's oil output, around 500,000b/d is currently produced in the Kurdistan region.

The vast majority of the crude produced in the Kurdistan region is exported via pipeline through Turkey, where it is sent to international markets from the port of Ceyhan. In this regard, Turkey, which is opposed to an independent Kurdish state on its border, holds a substantial amount of influence with regards to revenue generation in the region. Any disruption to crude flows through the pipeline to Ceyhan, or pull back of domestic purchases from Turkey would be bullish for oil prices. In addition, if Turkey does not intervene, Iraq has threatened to seize oil shipments from the region and sue traders involved. Both potential outcomes pose a short-term risk of disruption to the oil market as it would have a destabilising economic impact on the Kurdistan region.

Less Than 12% Of Iraqi Oil
Kurdistan As A % Of Iraq Oil Production (mn b/d)
* BMI estimates from field-by-field output. Source: OPEC Secondary Source, BMI

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