Oil futures fell Monday as record-high exports from Iraq's southern crude terminals and rising US drilling activity sowed doubts over the effectiveness of OPEC's agreed supply cuts.
NYMEX February crude settled $2.03 lower at $51.96/b. ICE March Brent settled down $2.16 at $54.94/b.
Iraqi crude exports from southern ports averaged a record 3.51 million b/d in December, according to the country's oil ministry.
Despite the rise in exports, Iraq remains committed to complying with its pledged output cut under the OPEC supply deal reached November 30, Iraqi oil minister Jabbar al-Luaibi said Monday.
Iraq vowed to lower its output by 210,000 b/d from its October level, which OPEC pegged at 4.651 million b/d.
OPEC's members agreed to lower their collective output by roughly 1.2 million b/d to 32.5 million b/d. Non-OPEC producers, including Russia, agreed to nearly 600,000 b/d of additional cuts.
Iraq plans on satisfying its production cut obligations by implementing scheduled field maintenance, according to senior Iraqi oil officials.
The UAE and Saudi Arabia have also been trying to move forward field maintenance to comply with pledged cuts that went into effect January 1, sources said.
"For prices to push higher, we need verification that OPEC and Russia have cut production and decide to keep it there for more than a week or two," said Gene McGillian, senior analyst at Tradition Energy.
Another factor keeping a lid on oil prices has been the growing US rig count and the possibility of more output down the line that would offset the OPEC supply deal, McGillian said.
The number of rigs drilling for oil in the US has increased for 10 straight weeks, according to Baker Hughes.
The weekly US oil rig count rose by four to 529 on Friday, the highest level in just over a year, Baker Hughes said. The rig count bottomed out at 316 in late May and has risen steadily since then.
However, some of the increased drilling activity could be needed to offset natural declines and keep production steady, said Phil Flynn, analyst at Price Futures Group.
"They must drill more to stay even with production and must keep increasing [the number of] rigs to get ahead of the decline rate," he said.
Refined product futures also fell sharply Monday. NYMEX February ULSD settled down 6.56 cents at $1.6376/gal. NYMEX February RBOB settled 6.33 cents lower at $1.5707/gal.
