London/ Singapore: Oil prices fell by $1 a barrel on Monday as signs of growing US production outweighed optimism that many other producers, including Russia, were sticking to a deal to cut supplies in a bid to bolster the market.
A stronger US dollar also weighed as the currency surge made it more expensive to hold dollar-denominated commodities.
Brent crude futures were down $1.01, or 1.8%, at $56.09 a barrel at 3.36pm. US crude futures were trading at $52.99 per barrel, down $1, or 1.85%.
“We see the optimism surrounding Opec and non-Opec production cuts being counterbalanced by fears of higher US crude production as the higher rig count of last Friday still weighs,” said Hans van Cleef, senior energy economist at ABN Amro.
Last week, US energy companies added oil rigs for a tenth week in a row, Baker Hughes data showed, extending a recovery in activity into an eighth month as crude prices remained at levels at which many drillers can operate profitably.
This raised concerns that US production is increasing and undermining efforts by the Organization of the Petroleum Exporting Countries and others to cut output.
Rising exports from Iran also added to bearish sentiment. Iran has sold more than 13 million barrels of oil held on tankers at sea, capitalising on its exemption from a global deal to cut production in order to regain market share and court new buyers.
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.
On the other hand, Russia, one of the world’s largest crude producers, appeared to be sticking to the agreement to cut as Russian energy market sources told Reuters the country’s output had slipped in the first week of the month.
Oil and gas condensate output averaged 11.1 million bpd from 1 January to 8 January, down from October’s 11.247 million bpd. Reuters