Oil prices closed up more than $1 per barrel on Tuesday (September 23) after a deal to resume exports from Iraqi Kurdistan stalled, easing some investors' concerns that the resumption would exacerbate concerns about a global oversupply.

Brent crude futures closed up $1.06, or 1.6%, to $67.63 per barrel, while U.S. West Texas Intermediate crude rose $1.13, or 1.8%, to $63.41 per barrel. Both benchmarks recouped significant losses earlier.

Pipeline oil exports from Iraqi Kurdistan to Turkey had not resumed on Tuesday despite hopes of a deal to end the deadlock, as the two major producers sought debt repayment guarantees. The agreement between Iraq's federal and regional Kurdish governments and oil companies aims to resume exports of about 230,000 barrels of oil per day from Kurdistan to global markets via Turkey, which have been suspended since March 2023.

Brent and WTI oil prices have fallen over the previous four sessions, by about 3%. "This is a perfect example of not counting your barrels until they're pumped. The market sold off on reports of a Kurdistan deal, and the lack of a deal has now taken those barrels off the market," said Phil Flynn, senior analyst at Price Futures Group.

Overall, the global oil market is bracing for rising supply and slowing demand, hampered by the adoption of electric vehicles and economic pressures triggered by US tariffs. In its latest monthly report, the International Energy Agency (IEA) stated that global oil supply will increase at a faster pace this year and that a surplus could widen by 2026 as production increases among OPEC+ members and supply increases from outside the producer group.

However, risks loom over the market as traders monitor the European Union's consideration of tighter sanctions on Russian oil exports, as well as escalating geopolitical tensions in the Middle East.

"The supporting element is the continued low OECD oil inventories," said UBS analyst Giovanni Staunovo, referring to inventories in high-income countries around the world. "On the other hand, higher crude oil exports from OPEC+ are a drag on prices, as is the lack of new sanctions targeting Russian oil exports."

US crude oil stocks are expected to have risen last week, while gasoline and distillate inventories likely fell, according to a preliminary Reuters poll on Monday. The market is awaiting weekly oil stockpiles data from the American Petroleum Institute, due later Tuesday.

"The market will continue to monitor distillate inventories, which are a weak area of ​​the market," said Flynn of Price Futures Group. The increase in distillate stocks should help ease concerns about Russian supply amid attacks on the country's oil infrastructure, Flynn added.

The Ukrainian military attacked two Russian oil distribution facilities in the Bryansk and Samara regions overnight, Kyiv's general staff said.

Ukrainian President Volodymyr Zelenskiy is scheduled to meet with U.S. President Donald Trump at the United Nations on Tuesday and push for new sanctions against Russia, in a renewed effort to persuade Trump to more firmly support Kyiv's war effort. (alg)

Source: Reuters