Monday 23rd January, 2017
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Oil down on concerns rising U.S. production could dampen output cut deal

Oil down on concerns rising U.S. production could dampen output cut deal

Oil fell two 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 market.
 
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.
 
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 January.
 
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.

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