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Oil prices fall on rising Iraq output, doubt over producer talks

By Reuters | August 29th 2016
An oil pumpjack

Oil prices fell about 1 percent on Monday as Iraq's production rose and as Iran said it would only cooperate in producer talks to freeze output if fellow exporters recognized its right to fully regain market share.

International Brent crude oil futures LCOc1 were trading at $49.32 per barrel at 0558 GMT, down 60 cents, or 1.2 percent, from their previous close.

U.S. West Texas Intermediate (WTI) crude futures were down 66 cents, or 1.39 percent, at $46.98 a barrel.

Prices have fallen by over 3.5 percent since their August peaks.

Traders said the price falls were a result of climbing output from the Middle East, where oil exports from Iraq's southern ports have averaged 3.205 million barrels per day (bpd) in August, exceeding the average level seen in July, according to two officials from state-run South Oil Company. Exports in July averaged 3.202 million bpd.

Iran said late last week that it would only cooperate in upcoming producer talks in September if other exporters recognized Tehran's right to regain market share lost during international sanctions that were only lifted in January.

Analysts said disagreements within the Organization of the Petroleum Exporting Countries (OPEC), and especially its key members Saudi Arabia and Iran, meant few expected a significant impact on global output from the talks.

"The market is increasingly likely to discount the outcome of the event, given, even in the instance of a freeze being agreed, compliance will be an issue," Barclays said.

Reuters commodity market analyst Wang Tao said that short-term technical indicators were also bearish, and that a drop to $48.52 per barrel was possible.

"Brent oil is expected to approach a support at $48.52 per barrel again, as its correction from the Aug. 19 high of $51.22 has not completed," he said.

Despite this, Barclays said that it saw "incoming oil market data (both demand and supply) as a source for price strength in Q4".

For now, the cheaper crude - the main feedstock for oil refiners - has helped lift refinery margins which have suffered from a fuel oversupply for much of this year.

Overall Singapore refinery margins DUB-SIN-REF, which are seen as a benchmark for Asia, have more than doubled since early August to over $6 per barrel, in part thanks to cheaper crude and also as a result of a tighter market due to refinery maintenance outages.

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