Reuters cited Mr Abdul Kareem Luaibi oil minister of Iraq as saying that top oil trader Vitol has apologised to the Iraqi government for buying Kurdish oil that was exported via Turkey without Baghdad's permission.

Baghdad is in dispute with Kurdistan over oil exports from the northern Iraqi province insisting the central government has the sole right to export oil, reimbursing payments to the Kurdistan Regional Government. It considers any other business illegal and tantamount to smuggling by the Kurds.

Luaibi, in Vienna for an Opec meeting was asked by reporters how Iraq was dealing with three companies Vitol, Trafigura and Lukoil who have purchased condensate, a light crude oil, sourced from Kurdistan and sold via an intermediary to world markets.

Luaibi said that in terms of Vitol, they have cancelled the Kurdish amount and they apologised officially. As for Lukoil, there will be a meeting about this concern maybe tomorrow or the day after..

Kurdistan began selling oil into international markets in independent export deals in October further challenging Baghdad's claim to full control over Iraqi oil after signing independent exploration deals with foreign oil majors last year.

Luaibi said that Kurdistan is now supplying less than 100,000 barrels a day to the central government via a Baghdad controlled pipeline to Turkey, compared to the 200,000 barrels per day it has agreed to deliver. Output from Kurdistan is rising but is still only a fraction of total Iraqi exports of 2.6 million barrels per day.

Baghdad had been informed about oil smuggling by neighboring countries. We have received messages from the adjacent neighbor countries concerning the smuggling of Iraqi crude oil. Iraq will work against any company that buys these smuggled shipments.

Luaibi declined to put a number on how much oil was being smuggled from Kurdistan to Iran and Turkey and then into world markets but said the volume amounted to the difference between what was being produced by the Kurds and supplied to the central government. Kurdish deliveries to Baghdad were more than 180,000 barrels per day last month and are now below 100,000 barrels per day.