Oil extended losses to multi-month lows on Monday on worries of oversupply as Opec pumped at record levels in July, while weak China data stoked concerns about slower growth at the world’s second largest oil consumer.
Oil output by the Organisation of the Petroleum Exporting Countries (Opec) reached the highest monthly level in recent history in July, a Reuters survey showed, with Saudi Arabia and other key members showing no sign of wavering in their focus on defending market share instead of prices.
The potential return of more Iranian oil further fuelled supply worries. Iran expects to raise output by 500,000 barrels per day (bpd) as soon as sanctions are lifted and by a million bpd within months, its Oil Minister Bijan Zanganeh has said.
“The market seems to again focus on the supply situation ... one of the difficulties is that Iran may be coming back and there is no obvious sign that Opec will make room for them,” Ric Spooner, chief market analyst at CMC Markets in Sydney said.
Brent fell 39 cents to $51.82 a barrel by 0449 GMT (8.49am UAE time) after touching an intraday low of $51.50, the lowest since February 2. It is on its longest weekly losing streak since late 2014.
US crude fell 33 cents to $46.79 a barrel after hitting the lowest in four months at $46.35. Front-month prices lost 20.8 per cent in July, the biggest monthly drop since October 2008.
Hedge funds and other speculators have slashed their bullish exposure to US crude to the lowest in nearly five years, trade data showed on Friday, as US drillers continue to add rigs and pump at full throttle despite a global oil glut.
“The recent recovery in the oil rig count supports our expectation that US producers can and will ramp up activity with WTI prices near $60/b, given improved returns with costs down 30 per cent,” Goldman Sachs analysts said in a weekly rig count report.
“The current rig count implies that US production will sequentially decline in 3Q15 although continue to grow in 2016.”
Growth at China’s big manufacturing companies unexpectedly stalled in July as demand at home and abroad weakened, an official survey showed on Saturday, adding to worries from a recent slump in Chinese stock markets.