Oil retreats over rising Iraqi exports, US production
NEW YORK — Oil prices tumbled by 4% on Monday on concern that record Iraqi crude exports and rising US output would undermine Organization of the Petroleum Exporting Countries (OPEC) efforts to curb global oversupply.
US 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.
“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.”
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 said 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, US energy companies added oil rigs for a 10th week in a row, Baker Hughes data showed, with some analysts expecting US rig count to rise to 850- 875 by yearend. Dealers say the recent uptick in US shale hedging to protect future output for 2018 and beyond could put more pressure on 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 US drilling rigs and actual oil production,” Tim Evans, Citigroup energy futures specialist, said in a note. —