NEW YORK: Oil fell more than $1 a barrel to below $56 on Monday as a rise in US drilling and higher Opec output put the brakes on a rally that helped prices to register their biggest third-quarter gain in 13 years.

Iraq announced its exports rose slightly in September while Opec overall boosted output, a Reuters survey showed.

In its report on Friday, General Electric Co’s Baker Hughes energy services firm said drillers added six oil rigs in the week to Sept 29, bringing the total count up to 750.

“We’ve seen them add rigs for the first time in seven weeks, so that changes sentiment as well,” said John Tjornehoj, energy market analyst at CHS Hedging.

Brent crude, the global benchmark, was down $1.22 or 2.15 per cent at $55.56 a barrel at 11:20 a.m. EDT (1630 GMT). It notched a third-quarter gain of about 20pc, the biggest third-quarter increase since 2004 and traded as high as $59.49 last week.

US crude was down $1.56 or 3pc at $50.11. The US benchmark posted its strongest quarterly gain since the second quarter of 2016.

The rally was driven by mounting signs that a three-year supply glut is easing, helped by a production cut deal among global producers led by the Organisation of the Petroleum Exporting Countries (Opec).

But a Reuters survey on Friday found Opec oil output rose last month, mostly because of higher supplies from Iraq and also from Libya, an Opec member exempt from cutting output. However, in a Monday letter the National Oil Company declared force majeure on deliveries from Sharara, the country’s largest oilfield.

Middle Eastern oil producers are concerned the price rise will only stir US shale producers into more drilling and push prices lower again.

Published in Dawn, October 3rd, 2017