An Iraqi deal ending a simmering impasse over oil is an economic victory as well as a blow to Islamic State insurgents, the U.S. State Department said.

Under the terms of an agreement reached earlier this week, around 250,000 barrels of oil per day are permissible for exports, while another 300,000 bpd will come from the disputed northern province of Kirkuk. Both sides will export their oil through the federal State Oil Marketing Organization, while the semiautonomous Kurdish government receives 17 percent of national oil revenues.

Marie Harf, a spokeswoman for the U.S. State Department, said the agreement is in line with existing constitutional mandates and gives all Iraqis a chance to benefit from the country's vast hydrocarbon reserves.

"This agreement will further strengthen both Iraq's federal government and the Kurdistan Regional Government as they work together to defeat the Islamic State," she said in a statement Tuesday.

In announcing the deal, Iraqi Prime Minister Haider al-Abadi said a portion of the funding goes to support Iraqi and Kurdish military forces.

The Peshmerga, a Kurdish military force, has been able to keep the northern region relatively secured and some oil companies have returned to service in the region.

U.S. and its coalition allies are supporting Iraqi forces on the ground as they battle the Sunni-led insurgent group. U.S. Secretary of State John Kerry said Wednesday from the sidelines of a NATO meeting on the Islamic State the oil agreement was a "significant achievement" for Iraq.

At the height of its campaign, IS controlled as many as seven oil fields and was said to be generating as much as $2 million per day in oil revenue. David S. Cohen, undersecretary for terrorism and financial intelligence at the Department of the Treasury, testified in November the group is "probably now earning several million dollars per week" from smuggled oil.

The Iraqi Oil Ministry said Wednesday both sides agreed to hold regular meetings aimed at implementing the mechanisms of the agreement.