Oil & Energy
Iraq Faces Dual Oil Export Threat With Hormuz Constraints, July Pipeline Deadline, Vortexa Says
Iraq's oil export problems have deepened, with seaborne exports dropping to just 260,000 barrels per day and a key pipeline agreement set to expire next month, Vortexa said in a Monday note.Iraq faces two major export challenges as restrictions on the Strait of Hormuz hurt southern shipments and the Kirkuk-Ceyhan pipeline agreement nears its July 27 expiration date, Vortexa said.Iraq's seaborne crude and condensate exports fell to a record low of 260,000 b/d in May. That was only 8% of the country's average export level in 2025 and down 145,000 b/d from April, according to Vortexa.Other Gulf producers managed the disruption better. Saudi Arabia kept exports at 57% of its 2025 average, while the UAE maintained 82% by using alternative export routes, the note said.Iraq's crude production fell to 1.5 million b/d in April, the lowest level in 10 years. Output had averaged 4.1 million b/d in January and February before the disruption, according to Organization of the Petroleum Exporting Countries data.Production recovered to about 1.8 million b/d in May, up roughly 20% over the month as some oil fields increased output, Vortexa said.The difference between production and exports has grown sharply. Iraq normally produced about 380,000 b/d more than it exported in 2025, but that gap widened to about 1.3 million b/d between March and May.Iraq increased refining activity after several refineries, including the Karbala refinery, reached full operating capacity in February. New processing units also started operating in Basra and Kirkuk, according to the note.The refinery upgrades aimed to reduce Iraq's refined fuel imports, which averaged 72,000 b/d in 2025. However, higher refinery demand does not fully explain the large gap between production and exports, according to Vortexa.Based on reported production levels, Iraq should have added about 46 million barrels to 55 million barrels to storage between March and May. Instead, onshore crude inventories fell by 2.1 million barrels during the period, Vortexa said.The inventory decline suggests Iraq may have shut in more production than official data shows. Higher crude use for electricity generation ahead of summer may also have reduced available export volumes.Meanwhile, Iraq faces uncertainty over the 1.6 million b/d Kirkuk-Ceyhan pipeline after Turkey issued a termination notice in July 2025 for the agreement, which expires on July 27, Vortexa said.Exports through the route stopped in April 2023 after an arbitration ruling ordered Turkey to pay Iraq $1.47 billion. Shipments resumed in October 2023 and averaged 220,000 b/d from October 2025 through February 2026.Iraq has increased crude exports through Syria after SOMO signed a cross-border trucking deal in April. About 500 to 700 tanker trucks crossed into Syria daily in early June, supporting exports of about 130,000 b/d from Baniyas in the four weeks ended June 14, the note added.Iraq is advancing the 2.5 million b/d, 700-kilometer Basra-Haditha pipeline, approved in 2024, to create an alternative to the Strait of Hormuz and the Kirkuk-Ceyhan corridor. The route would connect southern oil fields to export terminals in Turkey, Syria and Jordan and supply domestic refineries, Vortexa said.Tanker traffic through the Strait of Hormuz has improved in recent weeks, with Iraq-origin crossings rising more than 20% in the four weeks ended June 14. Iraq's share of total crossings also recovered to 40% from 9% in mid-May.Iraq's export outlook for June and July depends largely on Hormuz traffic, while failure to renew the Kirkuk-Ceyhan agreement by July 27 could increase reliance on Syrian trucking routes and accelerate the Basra-Haditha pipeline project, according to Vortexa.
