Oil fell towards six-year lows on Monday on data showing the economy of Japan, the world’s third-biggest oil consumer, contracted in the second quarter.
The global oversupply picture was exacerbated by another weekly jump in U.S. oil rig additions on Friday, hinting at growing production, and news that Oman produced a record-breaking 1 million barrels per day in July.
U.S. crude CLc1, or West Texas Intermediate (WTI), for September was trading 65 cents lower at $41.85 a barrel at 1155 GMT, close to its lowest level in more than six years.
Brent futures LCOc1 briefly reversed losses on news that Kuwait’s 200,000-barrel-per-day Shuaiba refinery had been shut down following a fire.
Brent for October reached an intra-day high of $49.44 a barrel shortly after news of the fire but had fallen back to $49.05 by 1155 GMT, down 14 cents on its previous close. The Brent September contract expired on Friday.
Over the past two weeks, U.S. crude prices have fallen by more than 10 percent on U.S. supply concerns. Brent has fallen by around 4 percent.
“We have seen Brent swing up and down over the past two weeks because of a lack of consensus about where oil should go directionally,” BNP Paribas energy commodities strategist Gareth Lewis-Davies said.
Production by the Organization of the Petroleum Exporting Countries is running well above demand, filling stockpiles worldwide.
Iran is expected to increase its oil exports once Western sanctions are lifted after ratification of a recent nuclear deal.
“The oversupply story remains well intact, which fuels the bearish sentiment,” said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.
Many money managers and hedge funds agree with the view that prices will likely remain low for a while as they cut net long positions of Brent crude futures for a fourth straight week, data from the Intercontinental Exchange showed.
“The end of the summer driving season and the start of refinery maintenance season will weigh on near-term demand and pressure prices,” said Societe Generale oil analyst Michael Wittner.
“Oversupply, high stocks, and seasonal weaknesses are outweighing record demand growth,” he said.
Demand for crude oil is set to fall in the next few weeks as refineries start annual maintenance. A number of European refineries will close for maintenance in September and October, including facilities operated by Royal Dutch Shell, Statoil and Total.