Global crude oil prices slips on concerns U.S. production is rising

Analysts say Iraq’s record high exports is a reminder that the market is still mired in surplus despite efforts to reduce the overhang.

Iraq’s crude exports from the country’s southern ports inched up last month to 3.510 million barrels per day for the first time, the oil minister said Monday, lauding his ministry’s plans and the work of a handful of worldwide companies developing Iraq’s prized southern fields.

While some quarters argue that the worst is yet to come for companies struggling with high gearing, Lim is seeing a better outlook for the industry in anticipation of higher average price of US$55 to US$60 (RM245 to RM267) per barrel for 2017 compared with US$47 for 2016. This could result in a meaningful upside to oil prices.

Supplies are also increasing in North America. The uptick was the 10th straight week of rig-count growth and the US now has the highest number of rigs in operation, at 529, since December 2015.

Worldwide spending is expected to increase 2 percent, according to Barclays’ survey of 215 global oil and gas companies. According to Reuters, hedge funds and other money managers amassed net-long positions in WTI and Brent equivalent to 796 million barrels in the last week of December, which was almost double the amount from mid-November.

Oil prices tumbled on Monday as rising USA production and record Iraqi crude exports offset the optimism over OPEC’s effort to cut global supply. Crude fell for a second straight day, with both US and global benchmarks down nearly 1% in recent market action.

Crude oil prices lost major ground in Monday trading following a report on December exploration and production activity from oilfield services company Baker Hughes.

Brent crude has surged in the last month, climbing by 20% following two separate production cut agreements by OPEC and non-OPEC members, with some 2% of global supply to be removed at the start of next year. Gulf oil producers Saudi Arabia, the United Arab Emirates, Qatar, Oman and Kuwait are implementing the cuts they promised, Nawal Al-Fezaia, Kuwait’s OPEC governor, said in an interview Monday in Kuwait City.

Many analysts still expect Russian oil production to grow in 2017 overall and reach a record high due to new fields coming on line. That would seem to contradict statements by the ministry on Tuesday saying it had already cut output by 160,000 bpd on the way to meeting its obligation under the Opec deal to cut 210,000 bpd in the first half of this year. Iran is allowed to raise its output to the pre-sanction of 3.975 million barrels a day.

Unshackled by worldwide sanctions in January 2016, Tehran has steadily boosted supplies as it seeks to retake the share it lost in the global crude market in the past several years.

According to IRNA, Iran used to sell 800,000 bpd to European refiners in Italy, Spain, Greece, Romania, France, the Netherlands and Poland in the pre-sanctions period.

What is clear is that oil speculators have built up such a large bullish bet on oil that they have opened up crude to near-term downside risk.

Traders also eyed news from OPEC member Kuwait, where bad weather forced the closure of oil exporting ports, state news agency Kuna said.