Oil Prices Decline as Iraq and Kurdish Governments Agree to Restart Pipeline

Strategic Insights -

Oil prices fell for the fifth consecutive session on Tuesday, with Brent crude futures dropping 34 cents to $66.23 a barrel and US West Texas Intermediate crude down 29 cents to $61.99 a barrel, as a preliminary agreement to restart an oil pipeline between Iraq and Kurdish regional governments added to concerns of oversupply. The deal, reached on Monday, will allow exports of about 230,000 barrels per day to resume from Iraqi Kurdistan, which has been suspended since March 2023. The global oil market is bracing for elevated supply and slowing demand, hampered by the development of electric vehicles and economic woes fueled by US tariffs.

Key Takeaways:

  • Oil prices declined for the fifth consecutive session on Tuesday, with Brent crude futures falling 34 cents to $66.23 a barrel and US West Texas Intermediate crude down 29 cents to $61.99 a barrel.
  • The decline is attributed to concerns of oversupply, with the restart of the KRG pipeline adding pressure on prices.
  • The global oil market is bracing for elevated supply and slowing demand, with the International Energy Agency predicting a rise in world oil supply and a potential surplus in 2026.
  • Traders are monitoring the European Union's consideration of stricter sanctions on Russian oil exports and geopolitical tensions in the Middle East.
  • Iraq, the second-largest producer in OPEC, has increased oil exports under an OPEC+ agreement.
  • US crude oil stockpiles are expected to have risen last week, while gasoline and distillate inventories likely fell.

Statistics:

  • Brent crude futures fell 34 cents, or 0.51%, to $66.23 a barrel by 0639 GMT.
  • US West Texas Intermediate crude was down 29 cents, or 0.47%, at $61.99 a barrel.
  • Over the last five sessions, Brent and WTI declined by 3% and 4% respectively.
  • The deal to restart the KRG pipeline will allow exports of about 230,000 barrels per day to resume.
  • World oil supply is expected to rise rapidly this year, with a surplus potentially expanding in 2026.

Sources:

  • Reuters, citing two oil officials, reported the deal between Iraq and Kurdish regional governments to restart the KRG pipeline.
  • The International Energy Agency's latest monthly report forecasts a rise in world oil supply and potential surplus in 2026.
  • Reuters also reported a preliminary poll showing US crude oil stockpiles expected to have risen last week, while gasoline and distillate inventories likely fell.
  • SOMO, Iraq's state oil marketer, confirmed the increase in oil exports under an OPEC+ agreement.