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Baghdad has transferred $500mn to the Kurdistan Regional Government (KRG) as part of a deal that will see 150,000 b/d of Kurdish oil handed over to the federal government. Iraqi Oil Minister ‘Adil ‘Abd al-Mahdi says this is not an oil-for-cash deal, but a confidence building step he hopes will lead to a comprehensive agreement over disputes that have festered for years.
While the accord reached in Erbil on 13 November is good news for Iraq, it comes at a time when oil markets are already oversupplied and global oil prices at a four year low. Benchmark Brent futures have shed nearly $40/B since mid-June, when the front month traded at $115/B in response to fears of a possible disruption to Iraqi oil production and exports shortly after Islamist militants seized Iraq’s second largest city Mosul and much of the north of the country. Prices subsequently eased after it became clear that Iraq’s southern production, the main source of exports, was not affected by the fighting further north. Rising Libyan output despite continued turmoil, slowing Asian GDP growth and soaring US output – to a 28-year high (see p20) – added to the bearish sentiment.
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