Oil Prices Confront Oversupply Concerns as Kurdistan Oil Exports May Resume

Concerns about a potential surplus in crude oil supply have been growing, and these fears may soon escalate as Iraq and the Kurdistan region seem to be moving closer to an agreement that could lead to increased oil output.

Iraq’s Oil Minister, Hayan Abdel-Ghani, has recently highlighted advancements in discussions with officials from Kurdistan regarding a potential deal for the resumption of oil exports from the region.

While this new export agreement is projected to contribute approximately 300,000 barrels of oil per day to global supply, analysts from Roth MKM suggest that it is not likely to drastically change oil prices. They indicated that it may lead to a modest downward effect over time.

The introduction of additional oil into the market is expected to help stabilize global prices during the summer months, counterbalancing the supply concerns typically associated with OPEC+ cuts, particularly in light of the increased seasonal demand expected in the third quarter.

Recent developments, such as repairs to the Kirkuk-Ceyhan oil pipeline— which had been closed since 2014 due to ongoing attacks by Islamic State militants—have set the stage for transporting 350,000 barrels of oil per day from Kurdistan to Turkey.

While a definitive agreement is not yet assured, there appears to be an increasing likelihood that the political environment is conducive to finalizing a revenue-sharing arrangement for Kurdish oil between Iraq and the Kurdistan region.