OIL PRICES FALL AFTER IRAQ SIGNALS DOUBTS OVER OPEC CUT

CRUDE PRICES ARE ALSO UNDER PRESSURE AS THE NUMBER OF ACTIVE OIL RIGS IN THE US CONTINUE TO CLIMB

OIL prices tumbled Monday amid doubts over OPEC’s proposed output cut, after Iraq signalled it wants to be excluded from the pact, WSJ reports. US crude for December delivery recently lost 73 cents, or 1.4%, to $50.12 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, lost 69 cents, or 1.3%, to $51.90 a barrel on ICE Futures Europe.

Iraqi oil officials Sunday were reported to have said they wouldn’t scale back output, which currently stands at 4.77 million barrels a day. Iraq is the second largest Organization of the Petroleum Exporting Countries producer after Saudi Arabia, making its commitment to any cut to OPEC’s oil output key.

“This shift by OPEC’s second-largest producer could become a deal breaker,” said Tim Evans, analyst at Citi Futures Perspective in New York.

OPEC members are scheduled to meet Nov. 30 to discuss individual production quotas, to limit the group’s production under 33 million barrels a day. The push for a cut had helped oil rally 30% in less than three months, but the market has given back 2.9% since hitting a new one-year high last week.

Many market observers are bracing for the deal to flop given the members’ record of not complying with quotas. “There is a risk that Iraq’s refusal could trigger a domino effect that other producers would ask to be exempt from the cuts too,” said Gao Jian, an energy analyst at SCI International.

OPEC members Iran, Libya and Nigeria already expected to be exempt from the deal, while nonmember Russia is also looking unlikely to join any action to curb production.

“If they do nothing, OPEC production next year is likely to average at least 34 mbpd (million barrels a day) with a real threat of it reaching close to 35 mbpd if the chaos in Libya and Nigeria were to be resolved,” brokerage PVM said.

Oil prices are also under pressure as the number of active oil rigs in the U.S. continue to climb. Last week, the oil-rig count rose by 11 to 443, according to oil-field services company Baker Hughes Inc.

The U.S. oil-rig count is typically viewed as a proxy for activity in the sector. After peaking at 1,609 in October 2014, low oil prices put downward pressure on production and the rig count fell sharply. The oil-rig count has generally been rising since the beginning of the summer and the uptrend is likely to continue, Morgan Stanley said in a note.

“Rig count typically lags prices by three to four months, so we would expect to see more rigs added, especially near year-end,” the bank said. China’s crude oil imports surged 18% in September, while gasoline exports rose 37% and diesel exports were up 44% versus the same period a year ago. Independent refiners in China have emerged as an important force in oil markets this year. They accounted for the vast majority of the 14% surge in imports this year by China, which now rivals the U.S. as world’s largest crude importer.

Political developments in Venezuela are being monitored after the congress announced they would begin impeachment proceedings against President Nicolás Maduro. The country’s oil-dependent economy has been hit hard by the prolonged collapse in crude price. Its oil production in the 12 months to September declined 11% to 2.3 million barrels and the economy is expected to contract by at least 10% this year.

Gasoline futures recently lost 1.9% to $1.5027 a gallon. Diesel futures lost 0.7% to $1.5635 a gallon.