Oil prices have tumbled amid doubts over OPEC’s proposed output cut, after Iraq signalled it wants to be excluded from the pact.

Light, sweet crude for December delivery on Monday settled down US33c, or 0.6 per cent, at $US50.52 a barrel on the New York Mercantile Exchange. US oil almost fell as low as $US49.62 a barrel before a rebound. Brent, the global benchmark, fell US32c, or 0.6 per cent, to $US51.46 a barrel.

Iraqi oil officials on Sunday were reported to have said they wouldn’t scale back output, which currently stands at 4.77 million barrels a day. Iraq is the second largest producer in the Organisation of the Petroleum Exporting Countries after Saudi Arabia, making its commitment to any cut to OPEC’s output key.

“This shift by OPEC’s second-largest producer could become a deal-breaker,” said Tim Evans, an analyst at Citi Futures Perspective in New York.

Enterprise Products Partners also announced on Monday that a leak led it to shut its Seaway Pipeline, which can carry 400,000 barrels a day to the Gulf coast from the Oklahoma hub for US oil.

That had some concerned about oil supplies backing up and initially caused US prices to fall much further than international prices.

But the market pared those losses throughout the day, a further sign that many bullish traders are eager to jump in and bet the market is ending a long period of oversupply, said Scott Shelton, broker at ICAP.

OPEC members are scheduled to meet on November 30 to discuss limiting the group’s production to less than 33 million barrels a day, a target which has already helped the market rally 30 per cent in less than three months.

Sceptics are also still active, though, and the market has given back 2.1 per cent since hitting a new one-year high last week. Many are bracing for the OPEC deal to flop given the members’ record of not complying with quotas.

“There is a risk that Iraq’s refusal could trigger a domino effect that other producers would ask to be exempt from the cuts too,” said Gao Jian, an energy analyst at SCI International.

OPEC members Iran, Libya and Nigeria are expected to be exempt from the deal, while non-member Russia is also looking unlikely to join any action to curb production.

“If they do nothing, OPEC production next year is likely to average at least 34 mbpd (million barrels a day) with a real threat of it reaching close to 35 mbpd if the chaos in Libya and Nigeria were to be resolved,” brokerage PVM said.

Oil prices are also under pressure as the number of active oil rigs in the US continues to climb. Last week, the oil rig count rose by 11 to 443, according to oilfield services company Baker Hughes.

The US oil rig count is typically viewed as a proxy for activity in the sector.

After peaking at 1609 in October 2014, low oil prices put downward pressure on production and the rig count fell sharply.

The rig count has generally been rising since the beginning of the northern summer and the uptrend is likely to continue, Morgan Stanley said in a note.

“Rig count typically lags prices by three to four months, so we would expect to see more rigs added, especially near year-end,” the bank said.

China’s crude oil imports surged 18 per cent in September, while petrol exports rose 37 per cent and diesel exports were up 44 per cent on the same period a year ago.

Extracted from The Australian.