Mystery tanker key to modern oil markets.

A tanker that showed up off the coast of Texas this weekend hints at direction of global crude oil industry.

Mystery tanker key to modern oil markets.

Reuters reports this morning that a tanker carrying crude oil from the semi-autonomous region of Kurdistan was cleared by the U.S. Coast Guard to unload its cargo to a Texas refinery on Sunday. The decision to allow the mystery cargo suggests an interesting vision of the future of Iraq. 

The crude comes from a new pipeline that delivers from a couple of new Kurdish oilfields that came online in the wake of the Iraq war. A former Canadian-listed company, Addax Petroleum, developed a field Taq Taq in the Kurdish region. Another small Norwegian driller, DNO , developed the Tawke field. These new fields were the first to be developed in Iraq. The deals to develop the fields were both signed directly with the Kurdish Regional Government, which controls the autonomous Kurdish region of Iraq.

The companies that developed these fields took a risk by signing development deals directly with the Kurdish Regional government. The Shia-dominated government in Baghdad has long declared the fields illegal, insisting all oil deals be signed through and managed by the central government and that revenues from such sales be routed through the Iraqi central bank.

So far, the American government has insisted U.S. buyers steer away from direct buys of Kurdish crude as a way of placating Baghdad. But the decision to allow the tanker full of Kurdish crude to unload suggests a shift in that policy.

This weekend, the mystery cargo of crude appeared off the coast of Texas. According to Reuters, the tanker "anchored on Saturday night in an area off the port of Galveston, Texas.” Reuters was not able to identify the buyer and the deliverer. Somewhere, however, a decision was made. According to Reuters, “Throughout Saturday and Sunday, the Coast Guard was in communication with the U.S. National Security Council, and departments of State and Homeland Security. A State Department official said officials were well aware the ship's location and cargo." Eventually, a decision was made to unload the crude.

That the U.S. State Department is allowing the delivery to go ahead suggests the U.S. seems to be limiting the influence of the Al-Maliki government in Baghdad in favour of bolstering Kurdish indepdence. Baghdad has threatened to sue if the Kurdish oil is unloaded. According to the Shia’s in Baghdad, this isw "smuggled oil." But the decision to unload went ahead.

The assumption, of course: Iraq is splintering into three distinct regions, Kurdish, Sunni and Shia. ISIS, a Sunni organization, recently took control of large parts of western Iraq. Now the crude from the new Kurdish fields is being shipped to America outside of Baghdad's control (accounts for Kurdish crude sales have been set up at the New York Fed so the funds do not have to go through the Baghdad central bank…apparently).

The delivery will bolster the autonomy of the Kurds, who have long fought for the creation of a Kurdish homeland. Tankers typically carry 1 million barrels of crude. With oil at $100 a barrel, this is a solid $100 million for the Kurds. The Kurdish crude is also quality light sweet crude, which is in great demand. Texas refineries have begun processing synthetic crude from the tar sands in greater amounts. Pipelines have been reverse to bring bitumen from Alberta south. But airlines have not been happy with the refined Alberta product. The Kurdish light, sweet crude would be highly prized.