(Updates with quotes, background, details)
ISTANBUL, Aug 8 (Reuters) - The Kurdistan Regional Government's (KRG) oil pipeline via Turkey is operating normally and pumping 120,000 barrels per day (bpd) of crude oil despite an advance by Islamic State fighters in northern Iraq, sources told Reuters on Friday.
"The crude flow is uninterrupted, pumping around 120,000 bpd," one industry source said. "Some fields such as Taq Taq are actually producing their highest."
The Sunni militants extended their gains on Thursday, seizing more towns and strengthening their presence near the Kurdish region in an offensive that has alarmed Baghdad and regional powers.
Until this week, most of Kurdistan had been protected from militants by its own armed forces, called the peshmerga. Hundreds of thousands of Iraqis fleeing the Islamists, including Christians and Yazidis, have taken refuge in the Kurdish area.
The KRG's independent oil pipeline came online last December and connects with the Baghdad-controlled federal Kirkuk-Ceyhan oil pipeline on the Turkish side of the border, carrying Kurdish crude to the Mediterranean port of Ceyhan.
The federal Kirkuk-Ceyhan pipeline carrying Kirkuk oil to Ceyhan has been down after consecutive attacks.
KRG shipped its first independent oil exports via Ceyhan to world markets in May, but has met strong objections from Baghdad and efforts to block its shipments as the central government sees itself as the sole authority on Iraqi oil.
The latest tanker carrying 260,000 barrels of Kurdish oil left Ceyhan port on Sunday.
Reuters photographs showed what appeared to be Islamic State fighters controlling a checkpoint at the border area of the Kurdish semi-autonomous region, little over 30 minutes' drive from Arbil, a city of 1.5 million that is headquarters of the Kurdish regional government and many businesses.
The fighters had raised the movement's black flag over the guard post. However, a Kurdish security official denied that the militants were in control of the Khazer checkpoint. The regional government said its forces were advancing and would "defeat the terrorists", urging people to stay calm.
(Reporting by Humeyra Pamuk and Orhan Coskun; Editing by Nick Tattersall and Dale Hudson)