Oil prices continued to fall on Monday, as expectations surrounding the resumption of oil exports from Iraq's Kurdish Regional Government (KRG) created ripples through the market. The international benchmark Brent crude dropped by 0.05%, trading at $73.86 per barrel, down from $73.90 at the close of the previous session. Similarly, the US benchmark West Texas Intermediate (WTI) decreased by 0.1%, settling at $72.12 per barrel compared to its prior close of $72.20. This downturn is significant as it marks the first bouts of oil exports from the KRG after nearly two years of suspension.
On February 24, 2024, the KRG announced it had reached an agreement with the Iraqi government to resume oil exports. Iraqi Deputy Oil Minister Basim Mohammed Khudhair informed the official Iraqi News Agency (INA) about the technical teams from the Iraqi state-run oil company North Oil and KRG representatives who are currently inspecting and assessing the readiness of export pipelines for oil re-pumping.
According to Khudhair, the plan is to kick off the first phase with 185,000 barrels of oil per day, with the volume gradually poised to rise to 400,000 barrels. This restoration of oil exports could alleviate supply concerns and potentially exert downward pressure on oil prices, as noted by energy experts.
Meanwhile, the backdrop of the global oil market remains precarious. Expectations of progress for peace talks involving Ukraine and Russia have also contributed to fluctuations, with US President Trump’s special envoy, Steve Witkoff, stating on CNN, "The war didn’t need to happen. It was provoked... We came very, very close to signing something, and I think we’ll be using [the Istanbul Protocol] as a guidepost to reach a peace deal between Ukraine and Russia." These diplomatic overtures suggest slivers of hope for stabilizing the broader geopolitical climate, which drives energy costs as sanctions altering the flow of oil continue to impact global dynamics.
Sugandha Sachdeva, founder of the New Delhi-based research firm SS WealthStreet, provided insight stating, "The downward spiral in crude oil prices is driven by pressure from the U.S. president on Iraq to resume oil exports from Kurdistan oilfields, which could improve supply flows in global oil markets after nearly two years of disruption." The implication here is clear: the KRG's advancements signal potential relief for the oil market already grappling with extensive losses.
The resumption of oil exports via the Iraq-Turkey pipeline marks a pivotal turn after more than two years of conflict and negotiation, heralding what many hope will stabilize not just Kurdish oil fields but the markets reliant on Kurdish production. The Iraqi Oil Ministry has confirmed it is engaged with Turkish authorities about the resumption of oil exports through Türkiye's Ceyhan seaport, awaiting their response.
With tensions still high and negotiations over the Russia-Ukraine conflict at the forefront of international relations, the oil market remains subject to flux. The possibility of rising supply, along with geopolitical narratives of peace or escalation, will surely continue to shape the market's next steps. The world watches closely as Iraq embarks on this renewed phase of oil production, with potential ramifications echoing far beyond its borders.
The relationship between regional stability, international markets, and energy production is intricately woven. Hence, the resumption of oil exports from the KRG not only influences prices locally but carries the weight of global supply dynamics amid geopolitical uncertainties. The interactions and resolutions surrounding these developments are likely to be closely monitored as countries adjust to shifting energy realities.
Observing how these elements combine—a resurgence of Kurdish oil combined with potential U.S.-Russia negotiations—presents both challenges and opportunities for the global energy market. With insights and predictions shaping expectations, all eyes are on Iraq as it prepares for this significant jumpstart back to the oil market.