Oil climbs ahead of US inventory data, while Kurdistan reopens pipeline

Oil prices rose on Tuesday, even as investors continued to assess global supply expectations, after the Iraqi government and the Kurdistan Regional Government reached a preliminary agreement to restart a key crude pipeline.

Brent crude futures gained 14 cents to $66.71 a barrel by 09:19 GMT, while US West Texas Intermediate (WTI) crude climbed 21 cents to $62.49 a barrel, erasing earlier minor losses.

Both Brent and WTI had declined over the previous four sessions, shedding around 3% of their value.

Giovanni Staunovo, an analyst at UBS, said: “There are still supportive factors, such as low oil stockpiles in OECD countries. But on the other hand, rising crude exports from OPEC+ remain a drag on prices, along with the absence of new sanctions targeting Russian oil exports.”

Traders are closely watching developments in the Middle East after Baghdad and the Kurdish regional government reached an agreement with oil companies on Monday to resume crude exports via Turkey, according to Reuters citing oil officials. The officials added that the deal is pending Iraqi cabinet approval on Tuesday.

The breakthrough would allow exports of around 230,000 barrels per day from Iraq’s Kurdistan region, which have been halted since March 2023.

Overall, the global oil market is bracing for oversupply and weakening demand, weighed down by the rapid adoption of electric vehicles and the economic fallout from US tariffs.

In its latest monthly report, the International Energy Agency said global oil supply is set to grow at a faster pace this year, with the surplus expected to widen in 2026 as OPEC+ output expands alongside rising non-OPEC supply.

Still, risks loom over the market, with traders watching whether the European Union will push forward stricter sanctions on Russian oil exports, as well as any escalation of geopolitical tensions in the Middle East.

A preliminary Reuters poll on Monday showed that US crude inventories likely rose last week, while gasoline and distillate stocks were expected to have declined.