According to sources familiar with the matter, Iraq is in negotiations with Vitol Group, one of the most influential giants in crude oil transportation and a major commodity trading company, to handle oil sales once crude oil exports from the country's Kurdish region resume after a two-year suspension. This development appears negative for the long-term weak international crude oil benchmark - Brent crude oil price trends this year, as the resumption of Kurdish oil exports will fuel expectations of "crude oil market oversupply," potentially pushing the recently rebounding Brent crude oil prices into a weakening trajectory.
Should a new settlement ultimately end the suspension, the participation of this world's largest independent oil trader could accelerate the global flow of crude oil from northern Iraq. Amanj Raheem, Cabinet Secretary of the Kurdistan Regional Government, stated that exports could resume as early as 6 AM local time on Saturday.
In other words, it's not "Vitol replacing the government to sell oil," but rather a division of responsibilities: ownership and pricing rights remain with the Iraqi government side (SOMO), typically based on official selling prices (OSP); sales and logistics execution would be delegated to Vitol to handle crude oil export sources at Turkey's Ceyhan port and other locations, manage external sales, arrange deliveries and settlements, essentially serving as a marketing agent/underwriter role. For international oil companies operating in the Kurdish region, Vitol may also sell their allocated oil volumes according to arrangements.
The resumption of Kurdish crude oil volumes could also enable Vitol Group to recover funds owed from arrangements made with Kurdish authorities before the 2023 suspension, including "cash-for-oil" style loans. A Vitol Group spokesperson declined to comment. SOMO did not immediately respond to requests for comment.
According to the International Energy Agency, the global crude oil market is on the brink of significant supply-demand oversupply, and the return of Kurdish crude would only exacerbate this oversupply situation. Previous reports indicated that the pipeline's initial resumption is expected to bring approximately 230,000 barrels of crude oil to international markets daily, with potential for further increases.
Iraq, a major Middle Eastern oil-producing nation, averages about 4.2 million barrels of crude oil production daily and exports most of its crude oil through the southern Basra port to buyers in Asia. Regarding the pipeline to Turkey's Ceyhan port, sources indicated that under the new agreement (if ultimately reached), Vitol would receive crude oil from Iraq's State Oil Marketing Organization (SOMO) at Turkey's Ceyhan port for sale to global markets.
A separate agreement would involve Vitol Group selling crude oil on behalf of international companies operating in the Iraqi market. This would differ from Vitol Group's previous arrangements, which involved selling crude oil provided by international companies extracting oil in the Kurdish region, arrangements that often bypassed government organizations and SOMO, intensifying disputes between Kurdish authorities and Iraq's capital Baghdad.
As OPEC's second-largest oil producer, Iraq has long-standing disagreements over control of Kurdish crude oil sales revenues. Earlier this year, the semi-autonomous region agreed to transfer control of its crude oil to SOMO for subsequent sales, paving the way for Iraq's federal government to allocate funds to Kurdish authorities and pay local salaries.
After months of further negotiations, Iraq's State Oil Marketing Company SOMO announced Tuesday that agreements to resume Kurdish exports have "entered the final stage." Sources indicated this includes reaching agreements with international producers in the region to transfer their crude oil to SOMO, with the state marketer hiring Vitol Group to market oil on behalf of itself and various producers.
One source said Vitol Group would handle Ceyhan port crude oil sales based on official selling prices set by SOMO. Sources also indicated that international oil companies operating in the Kurdish region would receive crude oil quotas at Ceyhan as compensation for their services, with Vitol Group subsequently selling these crude oils on their behalf.
The nearly two-year suspension of Kurdish crude oil exports stemmed from pipeline shutdowns following ICC arbitration, subsequently prolonged by a series of "political-legal-commercial" issues including Turkish compensation negotiations, Baghdad-Kurdistan marketing and budget disagreements, and oil company debt and contract renegotiation matters.
Recent proposals pushed by various parties involve SOMO uniformly receiving and selling at official selling prices (OSP), with initial resumption of approximately 230,000 barrels per day to international markets, while establishing a $16 per barrel transportation/production cost recovery mechanism for oil companies. However, final confirmation from Turkey and key oil companies is still needed for actual resumption.
On Friday, Brent crude oil futures prices rose to $70 per barrel, hovering near eight-week highs and potentially recording the largest weekly gain since early June, primarily due to supply concerns triggered by conflict pressures related to Russian crude oil infrastructure and Russian and Turkish crude oil transportation.
However, should the Kurdish pipeline resume operations as planned, this would be marginally bearish for Brent crude oil prices. Initial Kurdish resumption is expected to bring approximately 230,000 barrels per day to market, potentially rising to as much as 1 million barrels per day subsequently. The IEA assesses that 2025 supply-side fundamentals already lean toward oversupply, with potential for further expansion of supply oversupply in 2026. The return of Kurdish oil would undoubtedly exacerbate this supply oversupply market backdrop.