The 30-31 January attack and brief capture by Islamic State (IS) of the Khabbaz oil field in northern Iraq highlights the continued threat to Iraqi oil facilities, and the difficulty in raising export volumes from the north on a sustained basis. Iraq needs to extract every drop of oil to prevent the budget deficit from ballooning further, but the battle against IS is sapping cash that could otherwise be used for the reconstruction, which remains incomplete more than a decade after Saddam Husain’s ouster.

Indeed, Iraq’s oil exports and production declined in January after attaining a record in December. But while the fall is unrelated to the capture of Khabbaz, which produced 35,000 b/d, the monthly fluctuations in output and exports are an indication of the constraints that Iraq faces in its southern production hub. (CONTINUED - 1762 WORDS)