Oil Prices Slip Despite Lukoil Declaring Force Majeure in IraqBy Irina Slav - Nov 11, 2025


Crude oil prices opened lower today even after Russia’s Lukoil declared force majeure on its operations in one of Iraq’s biggest oil fields because of the latest U.S. sanctions.

At the time of writing, Brent crude was trading at $63.84 per barrel, with West Texas Intermediate at $59.89 per barrel, as reports suggest record high volumes of oil in floating storage, following Washington’s latest sanction salvo against Moscow.

Reuters reported on Monday, citing unnamed sources, that Lukoil had declared a force majeure on the West Qurna-2 field, which produces some 400,000 barrels of crude daily. Following the October 22 U.S. sanctions on Lukoil and Rosneft, Iraq had stopped all cash and crude payments to Lukoil, the sources told the publication. The Russian major has a 75% stake in the field.


Even so, the dominant sentiment on oil markets continues to be bearish thanks to projections of an oversupply. “As OPEC production increases grind on, global oil balances are acquiring an increasingly bearish hue on the supply side of the ledger with demand still trending lower in conjunction with a slowed economic growth path among major oil-consuming countries,” one outlet that shares the sentiment, Ritterbusch and Associates, said in a note as quoted by Reuters.
President Trump, meanwhile, said that he was close to closing a trade deal with India, noting that the latter had “stopped doing the Russian oil — it’s been reduced very substantially,” as quoted by Bloomberg.Now, oil traders would be awaiting OPEC’s latest monthly report, scheduled to be released tomorrow and coinciding with the International Energy Agency’s own monthly report. Both are likely to stick to their demand and supply projections, where OPEC sees demand as much stronger than the IEA, and the IEA expects a massive supply overhang, where OPEC sees a market more or less in balance.


By Irina Slav for Oilprice.com

Lukoil’s Iraq Exit Marks Major Sanctions Victory for the West

By Simon Watkins - Nov 10, 2025

• Lukoil is withdrawing from its core energy interests in Iraq, specifically the West Qurna 2 oil field, following a new wave of U.S. and E.U. sanctions targeting Russia's ability to fund the war in Ukraine.
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• The exit is considered a major geopolitical victory for the West, opening new opportunities for companies like ExxonMobil, BP, and TotalEnergies to expand their influence in Iraq's oil sector.
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• Lukoil’s departure was also driven by long-standing disputes with Iraq's Oil Ministry over the low remuneration rate of $1.15 per barrel and unmet production targets at the West Qurna 2 field

Russia’s second-largest oil producer Lukoil is withdrawing from its core energy interests in Iraq following the recent tightening of the sanctions noose around the country by the West. The latest prohibitions introduced by the U.S. on 22 October included measures directly aimed at Lukoil, and Russia’s top oil producer Rosneft. Between them, the two companies export approximately 3.1 million barrels of oil per day, which the West sees as vital to Russia’s ability to keep funding its war in Ukraine. Lukoil’s almost immediate capitulation of its huge West Qurna 2 oil field and Block 10 assets in Iraq marks a “major turning point” in the West’s fightback against increasingly aggressive Russia and Chinese moves against the allies, a senior Washington-based legal source who works closely with the U.S. Treasury exclusively told OilPrice.com last week. “It’s a big Russian major leaving two of its critical oil developments in one of its key areas of interest in the Middle East – it doesn’t get much bigger than that,” he added. Moreover, Lukoil’s exit from the major Iraq oil and gas sites opens new opportunities for Western firm to further extend the West’s resurgent influence across Iraq.

Washington and London are delighted with the news, according to the source, for three key reasons. First, Lukoil’s quick announcement of its exit underscores how effective the new set of sanctions on Russia is. The measures are part of a full range of blocking sanctions overseen by the U.S. Treasury’s Office of Foreign Assets Control (OFAC) including not just the two corporate entities of Lukoil and Rosneft (and their multiple subsidiaries) being added to the Specially Designated Nationals and Blocked Persons List but key individuals connected to the firms as well. Moreover, both firms’ interests in the U.S. are now blocked, and all the U.S.’s companies and citizens are barred from any dealings with either. Targeting Russia’s top two oil firms is a huge step up from what the previous sets of sanctions that encompassed lower-tier firms such as Gazpromneft and Surgutneftegas, which were in turn part of Washington’s gradual ‘tightening of the screws’ on Putin. The second reason is that the European Union (E.U.) continued to mirror such prohibitions against the cogs financing Russia’s war machine in Ukraine, as seen in its 19th sanctions package. These include additional measures targeting Russia’s shadow fleet of vessels used to evade current restrictions. And for the first time, the E.U. also targeted Russia’s crucial liquefied natural gas (LNG) sector, having earlier agreed to halt all Russian gas imports by 1 January 2027 – one year earlier than previously agreed. This was part of a broader 16 October vote to accelerate the union’s phaseout of Russian oil, gas, and LNG, which also saw the proposal to implement a full ban on Russian oil imports into the region from 1 January 2026. The third reason is how difficult Lukoil has so far found it to dispose of its Iraqi assets, which Washington and London are taking as a sign that the sanctions in place against Moscow now appear so strong and well-coordinated that they are a true deterrent to other actors who in the past may have looked to support Russia. Most notable in this context was that Swiss-based trading firm Gunvor has lost interest in pursuing such talks with Lukoil.

It is also the case, from Iraq’s perspective, that it was seeing diminishing returns in its ongoing relationship with Lukoil, not just from the geopolitical pressure the U.S. was bringing to bear, but also from a petro-economic one. On the first point, as analysed in full in my latest book on the new global oil market order, the battle for influence over Iraq’s oil fields is about a lot more than  just oil. Indeed, a source who works closely with the E.U.’s energy security apparatus exclusively told OilPrice.com at the time, that a very high-ranking official from the Kremlin said that: “By keeping the West out of energy deals in Iraq, the end of Western hegemony in the Middle East will become the decisive chapter in the West’s final demise.” On the second point, Baghdad had long endured problems with Lukoil on the site, which means it may have been happier than it has let on to yield to U.S. pressure regarding the firm. The original development plan for the West Qurna 2 field – with estimated recoverable oil reserves of around 13 billion barrels and one of the lowest lifting costs in the world at just US$2-3 per barrel -- was to produce 1.8 million barrels per day (bpd). However, this was amended in 2013 to a three-stage plan, with peak production set at 1.2 million bpd. Phase 1 would add around 120,000 barrels per day (bpd) to the early 30,000 bpd of production from the site’s Mishrif Formation. Phase 2 would add another 400,000 bpd from the full development of the Mishrif Formation. And Phase 3 would add another 650,000 bpd from the development of the deeper Yamama formation. 

However, it was around the time of the transition from Phase 2 to Phase 3, scheduled to start in the middle of 2017, that trouble began on the Russian side. Lukoil believed the level of remuneration it was receiving per barrel drilled was too low. It was being paid US$1.15 per barrel recovered—the lowest rate paid to any international oil company (IOC) in Iraq at that time — and dwarfed by the US$5.50 per barrel being paid to GazpromNeft for its development of the Badra oil field. Making matters worse for Lukoil at that point was that it had already spent at least US$8 billion in developing West Qurna 2, and compounding this grievance was the fact that Iraq’s Oil Ministry still owed it around US$6 billion in remuneration on recovered barrels and other development payments. In August 2017, a senior source who works closely with Iran’s Petroleum Ministry exclusively told OilPrice.com at the time, Lukoil was assured that Iraq’s Oil Ministry would very quickly pay the US$6 billion that it owed the company and that a higher compensation rate per barrel would be looked into as soon as was feasible. In addition, the Oil Ministry agreed to extend Lukoil’s from 20 to 25 years, so lowering the average yearly cost to the Russian firm. It was also agreed that Lukoil would invest at least US$1.5 billion in West Qurna 2 in the following 12 months with a view to raising production from the 400,000-bpd level closer to the 1.2 million bpd peak production target. 

Crucially for what followed, though, according to the Iran source, Lukoil knew back then that it was perfectly capable of producing at least 635,000 bpd on a sustained basis, having hit 650,000 bpd production over extended periods in August and September 2017, and with its engineers having assured senior management that 635,000-bpd production was achievable on an ongoing basis with no problems. Unfortunately for the Russians, the end of November 2017 saw Iraq’s Oil Ministry discover that Lukoil was holding out on it, followed by a subsequent threat to withhold all payments due to Lukoil until it began to increase production steadily up to the 635,000-bpd level that its own production tests had shown was perfectly achievable. In response, and after several IOCs withdrew from Iraq, Lukoil’s senior management believed the time was right to try again to force the Oil Ministry to honour its previous promises to increase its per-barrel compensation on the West Qurna 2 field. Surprisingly for the Russians, the Oil Ministry’s response was to say that it was fine if Lukoil wanted to leave but that before it did so it would pay compensation in lieu of the upfront investment that it promised in 2017 and promised again in 2019 as it was not meeting the time-sensitive oil production targets that it had agreed to. 

As it now stands, the way looks clear for any permutation of Western firms that have re-entered Iraq’s oil sector since Donal Trump began his second presidential term to take up where Lukoil left off in West Qurna 2. It might look like a good opportunity for U.S. oil giant ExxonMobil, given its longstanding involvement in the neighbouring West Qurna 1 field. Great Britain’s BP remains involved in the huge Rumaila field and following its strategy reset in February back to a more fossil-fuel focus it may be a good fit for them. Any Western company would also have the knowledge that France’s TotalEnergies is now also firmly established in country in its US$27 billion four-pronged deal aimed at improving the core infrastructure across Iraq’s oil and gas sector. Most notably here, the French firm is building out the vital Common Seawater Supply Project, aimed at boosting pressure in Iraq’s key field to increase and extend well productivity. 

By Simon Watkins for Oilprice.com