Kurdish Oil Exports Hit by Drone Attacks

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Amsterdam-Rotterdam-Antwerp (ARA) region inventories experienced a critically important drop of 86 kilotons week-on-week, settling at 1.76 million tons. This marks the lowest inventory level observed since January of this year,indicating a notable tightening in the European middle distillate market.

The robustness of the European middle distillate market is increasingly drawing diesel supplies from more distant locations. Reports suggest that some shipments are originating from East Asia and heading towards Europe. The strong performance of middle distillate cracks is providing a welcome boost to refinery margins. This improved profitability is anticipated to encourage refiners to increase their operational run rates,which should,in turn,help alleviate the current tightness in supply. Moreover, anticipated increases in OPEC+ oil production are expected to bolster the availability of medium sour crude, a key feedstock for many refineries.

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In the united States, natural gas prices remained relatively stable yesterday. The latest data from the Energy Facts Administration (EIA) revealed that US gas storage levels increased by 46 billion cubic feet (bcf) over the past week. This figure was largely in line with market expectations of a 45 bcf increase.Consequently, total US natural gas storage now stands at 3.05 trillion cubic feet (tcf). while this is 6.2% above the five-year average, it represents a 4.9% decrease compared to the same period last year.

Following an initial rally, european natural gas prices faced downward pressure towards the close of trading yesterday. The Title Transfer Facility (TTF) settled 1.15% lower. Earlier in the week, unplanned outages at the Nyhamna and Kollsnes processing plants in Norway had provided support for European prices.Though, recent grid data from the UK indicates that these flows are now showing signs of enhancement.Agriculture: Cocoa Prices Plummet Amidst Weakening Grindings

Cocoa prices faced significant pressure yesterday,with benchmarks settling more than 7% lower for the day,reaching their lowest point since February 2024. This sharp decline follows the release of grinding data from Europe,Asia,and North America,which revealed significant decreases. These figures signal a notable weakening in global cocoa demand. The sustained high price surroundings for cocoa has evidently led to demand destruction as market participants attempt to rebalance the supply and demand dynamics.

In Europe, data compiled by the European Cocoa Association shows a year-on-year decline of 7.2% (and a 6.2% quarter-on-quarter decrease) in cocoa grindings for the second quarter of 2025. The total volume reached 331.8 kilotons, marking the lowest level recorded since 2020. Similarly, data from the Cocoa Association of Asia indicates that Asian cocoa grindings fell by 16.3% year-on-year (and 17.4% quarter-on-quarter) to 176.6 kilotons in the second quarter, representing the lowest figure as 2017. Simultaneously occurring, the National Confectioners Association reported a more modest year-on-year decline of 2.78% in North American grindings, with 101.9 kilotons processed in the second quarter.

Disclaimer: This publication has been prepared by ING solely for informational purposes and does not consider the specific means, financial situation, or investment objectives of any particular user. The information provided does not constitute investment recommendations, nor is it investment, legal, or tax advice, nor does it represent an offer or solicitation to purchase or sell any financial instrument. read more*

What specific geopolitical factors contribute to the vulnerability of the Kurdistan pipeline to drone attacks?

Recent Escalation in Attacks & Impact on Global Supply

Drone attacks targeting oil infrastructure in the Kurdistan Region of iraq (KRI) have significantly disrupted Kurdish oil exports in recent weeks, raising concerns about regional stability and potential impacts on global oil prices. These attacks, frequently attributed to various militant groups, are increasingly sophisticated and pose a growing threat to the KRI’s economic lifeline. The primary export route, the pipeline to Ceyhan in Turkey, has been repeatedly targeted, leading to intermittent shutdowns and reduced flow rates.

Key Export Route: The Kurdistan pipeline is crucial for transporting crude oil from the KRI to international markets.

Disruption Levels: Recent attacks have caused export reductions of up to 20%, according to regional officials.

Geopolitical Implications: the instability directly impacts Turkey’s energy security and adds volatility to the broader Middle Eastern energy landscape.

Who is Behind the Attacks?

Attributing duty for these attacks is complex. Several actors have been implicated, including:

1. Iran-backed Militias: Groups like Kata’ib Hezbollah and other factions within the Popular Mobilization Forces (PMF) are frequently suspected. Their motivations often center around opposing increased Kurdish autonomy and challenging the presence of foreign forces in Iraq.
2. ISIS remnants: While significantly weakened, ISIS continues to operate in the region and has claimed responsibility for some attacks, aiming to destabilize the government and demonstrate continued relevance.
3. Local Grievances: Some attacks may stem from local disputes over oil revenue sharing or perceived marginalization by the KRI authorities.

The ambiguity surrounding the perpetrators complicates efforts to address the issue and implement effective security measures. Oil infrastructure security is paramount, but identifying and neutralizing the threats requires a nuanced understanding of the regional dynamics.

Economic Consequences for the Kurdistan Region

The disruption of oil exports from Kurdistan has severe economic consequences for the KRI.Oil revenue constitutes a ample portion of the regional budget, funding essential public services and infrastructure projects.

budgetary strain: Reduced oil income leads to delays in salary payments for public sector employees, a significant source of social unrest.

Investment Climate: The insecurity discourages foreign investment in the KRI’s oil sector, hindering long-term advancement.

Regional Economy: the downturn impacts related industries, such as transportation, logistics, and construction.

KRI Oil Companies: Companies operating in the region, including international oil companies (IOCs) like DNO and Genel Energy, face operational challenges and potential financial losses.

Turkey’s Role and Pipeline Security

The pipeline through Turkey is a critical component of the Kurdish oil export infrastructure. Turkey has increased security measures along the pipeline route, but the vast and often remote terrain makes it tough to prevent attacks.

Turkish Security Measures: Increased patrols, surveillance technology, and cooperation with local security forces.

Pipeline Vulnerabilities: The pipeline’s length and accessibility make it a constant target for sabotage.

Political Considerations: Turkey’s relationship with both the KRI and Iran adds a layer of complexity to the security situation.

Impact on global Oil Markets

While the disruption to Kurdish oil supply is not currently causing a major global crisis, it contributes to overall market volatility. The KRI typically exports around 400,000-500,000 barrels per day (bpd), a small but noticeable percentage of global supply.

Brent Crude: The attacks have contributed to slight increases in Brent crude oil prices, particularly during periods of heightened tension.

OPEC+ Dynamics: The situation adds another layer of uncertainty to the already complex dynamics within the OPEC+ group.

Alternative Supplies: Global markets are seeking alternative sources of supply to offset the reduced oil from Iraq.

Potential Solutions and Future Outlook

Addressing the issue requires a multi-faceted approach:

Enhanced Security Cooperation: Increased collaboration between the KRI,Iraq,Turkey,and international partners to improve pipeline security.

Diplomatic Efforts: Dialog with regional actors to address underlying grievances and de-escalate tensions.

Diversification of Export Routes: Exploring alternative export routes,such as through ports in Iraq,to reduce reliance on the turkish pipeline.

Investment in Pipeline Protection: Implementing advanced technologies, such as drone detection systems and automated surveillance, to protect the pipeline.

Addressing Root Causes: Tackling the underlying political and economic factors that contribute to instability in the region. Iraq oil policy and revenue sharing agreements need to be revisited.

The future of Kurdish oil exports remains uncertain. Continued attacks and political instability could further disrupt supply and hinder the KRI’s economic development. A sustained commitment to security cooperation, diplomatic engagement, and economic diversification is essential to mitigate the risks and ensure a stable energy future for the region. Energy security in Iraq is directly linked to regional stability.