Oil down on concerns
rising U.S. production could dampen output cut deal
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[January 09, 2017]
By Karolin Schaps
(Reuters) - Oil fell 2 percent on Monday as signs of growing U.S.
production outweighed optimism that many other producers, including
Russia, were sticking to a deal to cut supplies in a bid to bolster the
Brent crude futures were down $1.08, or 1.9 percent, at $56.02 a
barrel at 1227 GMT (7:27 a.m. ET), after touching a intra-day low of
$55.85. U.S. crude futures were trading at $52.99 per barrel, down $1,
or 1.9 percent, compared with a session low of $52.85.
"We see the optimism surrounding OPEC and non-OPEC production cuts being
counterbalanced by fears of higher U.S. crude production as the higher
rig count of last Friday still weighs," said Hans van Cleef, senior
energy economist at ABN Amro.
A stronger U.S. dollar also weighed as the currency surged on
expectations of faster U.S. interest rate hikes this year, making it
more expensive to hold dollar-denominated commodities. [FRX/]
Last week, U.S. energy companies added oil rigs for a 10th week in a row
to 529, Baker Hughes data showed, extending a recovery in activity into
an eighth month.
Analysts at Barclays said they expected the U.S. rig count to rise to
850-875 by the end of the year, with spending on exploration and
production set to increase 27 percent in North America.
This raised concerns that U.S. production is increasing and undermining
efforts by the Organization of the Petroleum Exporting Countries (OPEC)
and others to cut output.
In Iraq, OPEC's second-biggest producer, a record 3.51 million barrels
per day (bpd) were exported from its port in Basra in December,
officials said, although they added that the country would comply with
its commitment to lower output by an average of 210,000 bpd from
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Rigging equipment is pictured in a field outside of Sweetwater,
Texas June 4, 2015. REUTERS/Cooper Neill
Sources also told Reuters on Monday that Iraq's State Oil Marketing Company (SOMO)
had given three buyers in Asia and Europe full supply allocations for February.
Traders also eyed news from OPEC member Kuwait, where bad weather forced the
closure of oil exporting ports, state news agency Kuna said.
On the other hand, Russia, one of the world's largest crude producers, appeared
to be sticking to 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.
Analysts at JBC Energy were optimistic about a tighter oil market in 2017.
"Concerns regarding the sincerity, depth and duration of announced production
cuts notwithstanding, most analysts, including us, see
tighter-than-previously-envisaged balances for 2017," they said.
(Additional reporting by Henning Gloystein in Singapore; Editing by Alison
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