Crude Oil Price Slides on Iran Sales, Rising US Rig Count

"We see the optimism surrounding OPEC and non-OPEC production cuts being counterbalanced by fears of higher USA crude production as the higher rig count of last Friday still weighs", said Hans van Cleef, senior energy economist at ABN Amro.

As a result of the increased drilling, US oil output has risen by over 4 percent from its 2016 low to nearly 8.8 million barrels per day, although production remains 8.74 percent below its 2015 peak.

In 2012, Iran's energy sector was hit by the US-led sanctions, reducing the country's crude exports from 2.5 million bpd to almost 1 million barrels per day. In December the country exported a record 3.51 million barrels a day from the port of Basra.

The price of Iran's light oil stood at $53.31 in the mentioned week to push the average price for the Iranian light crude up to $41 in 2016.

As a result of the sanctions imposed by the United States and the European Union, Iran's exports of crude oil and lease condensate dropped to their lowest level since 1986. The amount of Iranian oil held at sea has dropped to 16.4 MMBbls, from 29.6 MMBbls at the beginning of October, according to Thomson Reuters Oil Flows data. That compares with 2.89 million barrels a day in December, according to data compiled by Bloomberg.

Oil prices were down 2.5% on Monday as signs that growing USA production and record Iraqi exports raised concerns that additional output would weigh on the market, effectively undermining efforts by OPEC to curb supplies.

Canada's main stock index fell in early trade on Monday, weighed down by energy stocks as oil prices fell and as shares in telecom companies also lost ground.

Before that sharp drop, the level had barely changed in 2016; it was 29.7 million barrels at the start of previous year, the data showed.

In fact, Nigeria, Africa's largest oil producer, has said it plans to boost output.

Crude futures in the US West Texas Intermediate rallied to $52.42 up by 9 cents last week while the Global benchmark Brent crude futures rallied up by ten cents to $55.57 per barrel.

Some market analysts contend that crude prices could reach $60-$70 a barrel in the coming months if the cuts are fully enforced.

  • Rogelio Becker