Iraq Declares Force Majeure Amid Hormuz Disruption

Iraq Halts Oil Exports, Declares Force Majeure

Iraq's oil ministry has declared force majeure on all oilfields developed by foreign companies, citing severe disruptions to navigation through the Strait of Hormuz. The measure follows escalating military operations that have halted the majority of the country's crude exports.

Overview of the Disruption

A letter from the ministry dated March 17 stated that military activity has severely impacted the Strait of Hormuz, a critical chokepoint for approximately 20 percent of global oil supplies. With most Iraqi crude transiting the strait, the disruption has pushed storage capacity to its limits, preventing tankers from lifting crude.

Economic and Market Impact

In response, Iraq has ordered a full production shutdown in affected areas. Oil Minister Hayan Abdel-Ghani confirmed that production at Basra Oil Company was cut from 3.3 million barrels per day to just 900,000 bpd. This drastic reduction will strain Iraq’s finances, as oil sales account for over 90 percent of state income.

Summary

The shutdown and export halt are direct consequences of regional conflict, which has pushed international oil prices to a near four-year high. The situation will be reviewed periodically based on regional stability, with significant implications for global energy markets.

FAQ

Q: What is force majeure in the oil industry?
A: It is a contractual clause that frees a party from liability or obligation when an extraordinary event or circumstance beyond their control, such as a war, prevents them from fulfilling their obligations.

Q: How much has Iraq's oil production been reduced?
A: Production at the key Basra Oil Company has been cut from 3.3 million bpd to 900,000 bpd.

Source: Investing.com