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Oil prices stage weak rally ahead of U.S

11 January 2017

OIL prices fell early yesterday as Iran increased exports, undermining efforts by other oil producers to curb a global fuel supply overhang, and as U.S. drillers increased activity for a 10th week. Brent, the global benchmark, fell 55 cents, or 1%, to $54.36 a barrel on ICE Futures Europe.

Oil fell for the first time in four days as an increase in US drilling activity fanned speculation that OPEC production cuts could revive output in North America.

Fundamentals could also surprise on the upside if oil supply falls more than expected or consumption accelerates.

SINGAPORE/MOSCOW Iraq plans to raise crude exports from its southern port of Basra to an all-time high in February, keeping exports high even as OPEC production cuts take effect this month.

Russia's oil and gas condensate output averaged 11.1 million barrels per day (bpd) in the period from January 1 to January 8, according to the two sources. While producers from Iraq to Kuwait say they have started to curb supply, an increase from countries such as Libya, which is from cuts, could put pressure on prices. Two years of low oil prices and the conflict with IS militants have left the country's coffers depleted.

According to a former director for worldwide affairs at NIOC, Mohsen Qamsari, Europe accounts for one-third of Iran's oil market and Asian buyers like India, South Korea and Japan top the NIOC export list.

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Iraq vowed to lower its output by 210,000 b/d from its October level, which OPEC pegged at 4.651 million b/d.

US oil drillers also increased activity for the 10th consecutive week, as crude prices remained at profitable levels for continued drilling.

Analysts said the gains on Tuesday came from expectations that some of the cuts planned by the Organization of the Petroleum Exporting Countries (OPEC), especially Saudi Arabia and Abu Dhabi, would materialise despite doubts over full implementation.

Oil prices have surged 19% to more than $55 a barrel since OPEC's November 30 deal to throttle down its output by about 4%, but the surge in Libyan production challenges a bet the cartel made against the North African country.

The weekly United States oil rig count rose by four to 529 on Friday, the highest level in just over a year, Baker Hughes said.

"Year-on-year, however, we still see Russian crude production rising 170,000 bpd to average 11.14 million bpd in 2017".