Oil prices edged higher on Tuesday even as investors weighed the global supply outlook after Iraq and Kurdish regional governments reached a preliminary agreement to restart an oil pipeline.

Brent crude futures rose 14 cents to $66.71 a barrel by 0919 GMT, while U.S. West Texas Intermediate crude gained 21 cents at $62.49 a barrel, both recouping modest earlier losses.

Brent and WTI had fallen for the previous four sessions, dropping around 3%.

"Supportive elements are still low OECD oil inventories," UBS analyst Giovanni Staunovo said. "On the other hand, higher crude exports from OPEC+ are a headwind for prices as well as the lack of new sanctions targeting Russian oil exports."

Investors on Tuesday were watching developments in the Middle East, after Iraq's federal and Kurdish regional governments reached a deal with oil firms to resume crude exports via Turkey on Monday, two oil officials told Reuters. The deal is subject to Iraqi cabinet approval on Tuesday.

The breakthrough will allow exports of about 230,000 barrels per day (bpd) to resume from Iraqi Kurdistan that have been suspended since March 2023.

Overall, the global oil market is bracing for elevated supply and slowing demand hampered by the fast development of electric vehicles and economic woes fuelled by U.S. tariffs.

In its latest monthly report, the International Energy Agency said world oil supply would rise more rapidly this year and a surplus could expand in 2026 as OPEC+ members increase output and supply from outside the group grows.

Still, risks overhang the market as traders monitor the European Union's consideration of stricter sanctions on Russian oil exports, as well as any escalation of geopolitical tensions in the Middle East.

U.S. crude oil stockpiles were expected to have risen last week, while gasoline and distillate inventories likely fell, a preliminary Reuters poll on Monday showed.

Source: Investing.com