Crude oil is sliding after Iraq said its exports reached a record high (WTI, OIL, VDE, BNO)

Markets Insider

NEW YORK (Reuters) - Oil prices were down 2.5% on Monday as signs that growing U.S. production and record Iraqi exports raised concerns that additional output would weigh on the market, effectively undermining efforts by OPEC to curb supplies.

U.S. crude futures were trading at $52.66 barrel, down $1.33 at 10:51 a.m. ET (1551 GMT). Brent futures were down $1.40 a barrel at $55.70 a barrel.

In Iraq, OPEC's second-biggest producer, oil exports from the southern Basra ports reached a record high of 3.51 million barrels per day (bpd) in December, the oil ministry said.

While the nation's oil ministry underscored that the high levels from the south would not affect the country's decision to lower production in January to comply with the OPEC agreement, some remained concerned that cuts - which would have to come from the north - would be feasible.

"We have compliance with the Gulf countries, but the rest of the slate is looking a bit shaky," said Robert Yawger, director of the futures division at Mizuho Securities USA.

"With the big numbers coming out of the southern port of Basra for December...it's implying that Iraq may be the first big crack in the wall of the OPEC agreement," he added.

Sources also told Reuters that Iraq's State Oil Marketing Company (SOMO) had given three buyers in Asia and Europe full supply allocations for February.

The lower optimism comes despite Russia, one of the world's largest crude producers, appearing to stick with 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.

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.

Dealers add that the additional rigs and recent uptick in hedging activity to protect future output for 2018 and beyond could put more pressure into the market.

"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.

(Additional reporting by Karolin Schaps in London and Henning Gloystein in Singapore; Editing by Marguerita Choy and Louise Heavens)

NOW WATCH: Here's what happens to your body when you stop eating sugar