An oil pipeline in the Kurdistan Region. Photo: Farzin Hassan/Rudaw
ERBIL, Kurdistan Region – Oil prices rose to the highest they have been in over two years on Monday, partially due to concerns about Kurdistan’s independent referendum and a threat from Turkey to block Kurdistan’s oil exports.
"Brent Crude traded a 27-month high overnight as the Kurdish referendum stokes supply concerns, while strong demand from China also aids sentiment,” said an analyst at Accendo Markets Mike van Dulken, as reported by Business Insider on Tuesday.
Brent Crude reached a high point of $59.02 barrels per day (bpd) after more than two years averaging between $52.00 and $53.00 bpd.
Turkey has threatened that it would close its borders with the Kurdistan Region because of vote for independence from Iraq. Turkish President Recep Tayyip Erdogan said they would also consider blocking Kurdistan’s oil exports.
"The Kurdistan region of Iraq currently produces around 650,000 barrels per day, of which 85% goes through the Turkish pipelines. If the Turks decided to cut crude flows, it would create a shock which markets are currently pricing in,” said Hussein Sayed Chief Market Strategist at FXTM, a leading firm specializing in trading.
"Entrance-exit will be closed" at the Khabur border crossing to the Kurdistan Region, Erdogan said in a speech in which he angrily denounced Monday's referendum as "illegitimate," according to AFP.
He added: "After this let's see... who they sell (their oil) to. The valve is with us. It's finished the moment we close it."
In addition to the pipeline bringing Kurdistan’s oil to Turkey’s Ceyhan port for export to international markets, Turkey is also a key buyer of Kurdistan’s oil and gas, and is an important trading partner.
In the first half of 2017, $5 billion worth of trade passed between Turkey and Kurdistan, a 20 percent increase over the same period the year before.