Oil prices tumbled on Monday as rising U.S. production and record Iraqi crude exports offset the optimism over OPEC’s effort to cut global supply. Global crude benchmark Brent for March deliveries fell as much as 4 percent to $54.83 a barrel by 3:29 p.m. on London’s ICE Futures exchange. While U.S. West Texas Intermediate future for February deliveries also dropped 3.91 percent to 51.88 a barrel on New York Mercantile Exchange.
“Concerns about the impact of rebounding U.S. oil production are likely to limit oil’s ability to rise too quickly, even as the global supply/demand balance tightens,” said Robbie Fraser, commodity analyst at Schneider Electric, in a note Monday. “As such, the U.S., along with [the Organization of the Petroleum Exporting Countries’] exempt members Libya and Nigeria, will be the most important countries to watch over the next six months in terms of potential production upside.”
On Friday, Barker Hughes Inc.’s data show that U.S. drillers add oil rigs to a total of 529, the highest level in a year. This also marked the a 10th-straight week increase. Analysts from Barclays said they expected the U.S. rig count to rise to 850-875 by year end.
Iraq’s record oil output also weighs on the oil price. Oil Minister Jabbar Al-Luaibi said oil exports from the southern Basra ports reached a record high of 3.51 million barrels per day in December. But he also said the high exports in southern will not affect their commitment to the production cuts.
“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.