Iraq Refuses to Join OPEC Cut, Weights on Oil Prices

Oil prices tumble early on Monday as Iraq declines to cut production and US drillers escalate work. Iraq said it does not want to be involved in any deal by producer cartel OPEC to decrease oil production to prop up the market.

Brent crude futures LCOc1 were down 0.4 percent, or 19 cents, from their last close as they traded at $51.59 a barrel at 1033 GMT.

US West Texas Intermediate (WTI) crude was trading at $50.63 per barrel, down 22 cents, or 0.4 percent.

The price falls after comments from Iraq saying it wanted to be let off from a production cut by the Organization of Petroleum Exporting Countries (OPEC), traders said. The oil cartel plans to decide on the production cut at its meeting on November 30.

OPEC plans to bring down production from 33.39 million barrels per day (bpd) in September to a range of 32.50 million to 33.0 million bpd.

If Iraq didn’t participate, it would be harder to accomplish since it is OPEC’s second-largest producer next to Saudi Arabia.

Iraq said on Sunday that its oil production stood at 4.774 million bpd, with exports standing at 3.87 million bpd.

“We are not going back in any way, not by OPEC not by anybody else,” Iraq’s State Oil Marketing Company head Falah al-Amri said.

ANZ bank said on Monday that remarks by Iraq over the weekend that it may not fall in with the OPEC deal to bring down production could see oil prices come under pressure in today’s session.

Further, US oil rigs increased by 11 last week, the first double-digit rise since August, which added more pressure to the market.

Morgan Stanley said that rig counts would continue to rise in the wake of the recent price rally.

Also weighing on oil is the ongoing strength of the dollar, crimping demand while it makes fuel purchases more costly for nations using other currencies at home.

Meanwhile, official data showed on Monday that, on the demand side, Japan’s crude imports dropped to 3.37 million, or 4.6 percent, in September from the same month a year earlier.

Analysts said that oil markets, despite of Monday’s lower prices, might be rebalancing in terms of consumption and production after being pulled down by two years of oversupply.

Barclays bank said in a note to clients on Sunday that statistical balances indicate that circumstances have improved markedly. They believe that the market is moving more swiftly into balance than is generally acknowledged.

“The market moved into a small deficit in Q3, will remain so in Q4 and then the deficit will expand significantly in 2017,” it added.

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US Drilling, Strong Dollar Brings Down Oil Prices

A strong dollar, a rising rig count in the United States, and record OPEC output pulled down oil prices on Monday.

US West Texas Intermediate (WTI) crude futures were behind 15 cents from their last settlement. They were trading at $50.20 a barrel at 0710 GMT.

According to traders, WTI was pulled down by another increase in US oil drilling activity.

US drillers added four rigs in the week to October 14. This was indicated in a report by oil services provider Baker Hughes showed on Friday. It was the 16th consecutive week that oil drillers had gone without making cuts, signifying more production to come.

International benchmark Brent crude oil futures also dropped, falling 8 cents from their last settlement to $51.87 a barrel.

A seven-month high of the dollar compared to a basket of other leading currencies on Monday, following an expected hike in US interest rates later this year also weighed on crude prices, traders said.

Fresh production records from the Organization of the Petroleum Exporting Countries (OPEC) also weighed on Brent. OPEC pumped out a record 33.6 million barrels of crude oil per day in September.

According to Bernstein Energy in a note to clients on Monday, Elevated inventories of oil, record supply from OPEC year-to-date, and weaker global GDP estimates cause them to lower and flatten their oil price outlook.

“We reduce our Brent forecast to $60 per barrel in 2017 ($70 per barrel before) and $70 per barrel in 2018 ($80 per barrel before),” it added.

Analysts said that traders were wary of driving the market much further down. The reason for this is a plan by OPEC to decrease output. It is part of a scheme to contain a global production overhang. This now stands at about half a million barrels of crude every day in excess of demand.

OPEC plans to meet on November 30 to deliberate on a reduction of around one million barrels a day. The cartel hopes non-OPEC members, specifically Russia, will join a prospective cut.

ANZ bank said that investors are not keen on getting too bearish with Russia conveying interest to join the agreement.

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