REPORT: Kurds abandon territory in the face of Iraq government advance

The Baghdad government recaptured territory from Kurds across the breadth of northern Iraq on Tuesday, making startlingly rapid gains in a sudden campaign that has shifted the balance of power in the country almost overnight.

In the second day of a lightning government advance to take back towns and countryside from forces of the Kurdish autonomous region, Kurdish troops known as Peshmerga pulled out of the long disputed Khanaqin area near the Iranian border.

Government troops took control of the last two oilfields in the vicinity of Kirkuk, an oil city of 1 million people that the Peshmerga abandoned the previous day in the face of the government advance. A Yazidi group allied to Baghdad also took control of the town of Sinjar.

Baghdad's military operation has redrawn the map of northern Iraq, rolling back gains by the Kurds who infuriated Baghdad last month by holding a referendum on independence.

The Kurds govern three mountainous northern provinces in an autonomous region, and have also held a wide crescent of additional territory in northern Iraq, much of which they seized after helping drive out Islamic State militants since 2014.

Prime Minister Haidar Abadi ordered his troops on Monday to raise their flag over all Kurdish-held territory outside the autonomous region itself. They achieved a swift victory in Kirkuk, reaching the centre of the city in less than a day.

The fighting in one of Iraq's main oil-producing areas has helped return a risk premium to oil prices. After months of range-bound trading, benchmark Brent crude is now above $58 a barrel, up almost a third from its mid-year levels.

Oil officials in Baghdad said all the fields near Kirkuk were working normally on Tuesday after the last came under central government control. Kirkuk is the base of Iraq's Northern Oil Company, one of the two giant state energy firms that provide nearly all government revenue.

Oil minister Jabar al-Luaibi said Baghdad would now try to nearly double the output of the Kirkuk oil fields to more than 1 million barrels per day.