Oil prices tumbled Tuesday after the Iraqi government and autonomous Kurds struck a deal that will boost the country's crude oil exports to an already oversupplied global market.
US benchmark West Texas Intermediate for delivery in January fell $2.12 to close at $66.88 a barrel on the New York Mercantile Exchange.
The London benchmark, Brent oil for January delivery, settled at $70.54 a barrel, down $2.00 from its Monday closing level.
Iraq's government and the autonomous Kurdish region announced Tuesday an agreement resolving their longstanding disputes over the budget and oil exports.
Under the deal, due to take effect at the start of next year, 250,000 barrels per day of oil will be exported from the autonomous region and another 300,000 bpd from the disputed province of Kirkuk.
The new deal could help push OPEC member Iraq's daily output past three million barrels per day, up from around 2.5 million barrels in November.
The additional 550,000 barrels per day is "not a huge amount of oil, but in the market that is already weak, it pushes prices down," said Michael Lynch of Strategic Energy and Economic Research.
Oil prices were hammered late last week after the Organization of the Petroleum Exporting Countries left its output ceiling unchanged, despite the supply glut driving prices sharply lower.
John Kilduff of Again Capital stressed there was "clearly no relenting to the pressure on prices from the fact that supply is out there and will continue to be."
Weak economic data is adding to the pressure on prices, Kilduff said, citing recent worse-than-expected manufacturing data in China, the world's largest energy consumer.
China's official purchasing managers index fell to an eight-month low of 50.3 in November from 50.8 in October. A reading above 50 indicates growth.