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Oil prices declined in Asian trading on Wednesday, retreating from recent highs after Iraq and Kurdish authorities reached an agreement to resume exports through Turkey’s Ceyhan port, offering some relief to strained global supplies.
Despite the pullback, Brent crude remained above the key $100 per barrel level, as the ongoing U.S.-Israel conflict with Iran continued to underpin market concerns over supply disruptions.
By 00:18 ET (04:18 GMT), Brent futures fell 2.3% to $101.05 per barrel, while West Texas Intermediate (WTI) dropped 3.3% to $93.03 per barrel.
Iraq deal provides limited relief
The agreement between Iraq’s central government and the Kurdistan Regional Government will allow oil exports to resume through the Ceyhan terminal in Turkey starting Wednesday.
The move comes as producers scramble to establish alternative export routes, particularly after Iran effectively blocked the Strait of Hormuz, a crucial shipping channel that handles around 20% of global oil supply.
However, the additional supply from Ceyhan is expected to cover only a fraction of the shortfall caused by disruptions in Hormuz. Iraq had reportedly taken nearly 70% of its oil production offline due to the conflict, with plans to resume exports of at least 100,000 barrels per day through the Turkish route.
Inventory build adds pressure
Oil prices were also weighed down by fresh data from the American Petroleum Institute (API), which showed a 6.6 million barrel increase in U.S. crude inventories last week—far exceeding expectations for a modest draw.
The data raised concerns about short-term demand and typically signals a similar trend in official government inventory figures, due later on Wednesday.
Geopolitical risks remain elevated
While the Iraq deal provided some relief, geopolitical tensions in the Middle East remain a dominant factor for oil markets.
Reports indicated that the United Arab Emirates may join a U.S.-led initiative to secure shipping routes through the Strait of Hormuz, potentially becoming the first country to support Washington’s efforts after several allies declined.
Meanwhile, hostilities between Iran, the U.S., and Israel continue to escalate. Iran has intensified attacks on vessels in and around the strait following strikes on a key Iranian export terminal. Unconfirmed reports also suggest that senior Iranian official Ali Larijani was killed in a recent Israeli strike, raising the risk of further retaliation.
Fed decision in focus
Market caution was also evident ahead of the Federal Reserve’s policy decision, due later in the day. Investors are concerned that persistent oil-driven inflation could prompt the central bank to adopt a more hawkish tone.
Outlook
Although oil prices have pulled back from recent peaks, they remain elevated amid ongoing geopolitical risks and supply uncertainties.
The balance between emerging supply relief—such as the Iraq export deal—and continued disruptions in key shipping routes will likely keep markets volatile in the near term, especially as investors await clearer signals from central banks on inflation and interest rates.
