Oil Down 4% On Concerns Over Rising Iraqi Exports, US Output

Oil Down 4% On Concerns Over Rising Iraqi Exports, US Output
Oil prices tumbled by 4% on concern that record Iraqi crude exports and rising US output would undermine OPEC's efforts to curb global oversupply.
Reuters

NEW YORK, Jan 9 (Reuters) - Oil prices tumbled by 4 percent on Monday on concern that record Iraqi crude exports and rising U.S. output would undermine OPEC's efforts to curb global oversupply.

U.S. crude futures settled down $2.03 at $51.96 a barrel, while Brent futures settled down $2.16 at $54.94 a barrel.

In Iraq, OPEC's second-biggest producer, oil exports from the southern Basra ports reached a record high of 3.51 million barrels per day (bpd) in December, the oil ministry said.

OPEC members agreed in November on the first deal to cut oil output since 2008, limiting supplies to 32.5 million bpd starting Jan. 1 for six months.

Iraq's oil ministry underscored that the high levels from the south would not affect the country's decision to cut January production to comply with the OPEC agreement. But some remained concerned over the feasibility of the cuts, which would have to come from the north.

"We have compliance with the Gulf countries, but the rest of the slate is looking a bit shaky," said Robert Yawger, director of the futures division at Mizuho Securities USA.

"With the big numbers coming out of the southern port of Basra for December ... it's implying that Iraq may be the first big crack in the wall of the OPEC agreement," he added.

Sources also told Reuters that Iraq's State Oil Marketing Company had given three buyers in Asia and Europe full supply allocations for February.

The lower optimism comes even though Russia, one of the world's largest crude producers, is apparently sticking with the agreement to cut. Russian energy market sources told Reuters the country's output had fallen by 100,000 bpd in the first week of the month.

Kuwait's oil minister added on Monday that an OPEC committee will meet in Vienna on Jan. 21-22 to monitor compliance and agree on a "final monitoring mechanism."

Last week, U.S. energy companies added oil rigs for a 10th week in a row, Baker Hughes data showed, with some analysts expecting the U.S. rig count will rise to 850-875 by the end of the year.

Dealers say that the recent uptick in U.S. shale hedging to protect future output for 2018 and beyond could put more pressure into the market. They add that high inventories nationwide are still a hurdle for the market.

"The price weakness ... calls attention to some bearish news that the market had been willing to ignore, such as the high level of (fourth quarter) supply still in transit to consumers and the uptrend in U.S. drilling rigs and actual oil production," said Tim Evans, energy futures specialist at Citigroup, said in a note.

(Additional reporting by Karolin Schaps in London and Henning Gloystein in Singapore; Editing by Frances Kerry and Will Dunham)

Copyright 2016 Thomson Reuters.

Copyright 2017 Thomson Reuters. Click for Restrictions.

WHAT DO YOU THINK?

Click on the button below to add a comment.
Post a Comment
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

Events  SUBSCRIBE TO OUR NEWSLETTER

Our Privacy Pledge
SUBSCRIBE



Most Popular Articles

From the Career Center
Jobs that may interest you
Sales Representative
Expertise: Customer Service|Sales
Location: Canonsburg, PA
 
Project Manager, USA
Expertise: Project Management
Location: United States
 
Executive Protection Coordinator
Expertise: Risk Management|Security
Location: TX
 
search for more jobs

Brent Crude Oil : $50.8/BBL 0.47%
Light Crude Oil : $47.97/BBL 0.56%
Natural Gas : $3.08/MMBtu 0.98%
Updated in last 24 hours