Oil declined from a one-week high in London and New York as Iraqi production advanced to a record, compounding a global supply surplus.
Prices slid as much as 1.9 percent in London and New York after their first weekly gain in two months. Iraq is pumping at a record pace of 4 million barrels a day, oil minister Adel Abdul Mahdi said.
Oil extended losses after Chinese shares plunged the most since 2008 as regulators cracked down on margin lending.
Crude slumped almost 50 percent last year as the US pumped oil at the fastest rate in more than three decades while the Organization of Petroleum Exporting Countries resisted calls to cut supply. Iraq’s oil production rose to a 35-year high in December and could break further records in the coming months, according to the International Energy Agency.
“With supply exceeding demand it still seems highly likely that the market will fall further,” Christopher Bellew, senior broker at Jefferies International Ltd. in London, said. “Rallies above $50 have proved very short-lived and my expectation is for the price to move in a sideways range until the next move to the downside, which I expect to take the price to $40 or lower.”
Brent for March settlement slid as much as 95 cents to $49.22 a barrel on the London-based ICE Futures Europe exchange. It gained 3.9 percent to $50.17 on January 16, the highest settlement since January 8. It was at $49.77 at11:28am. London time. The European benchmark crude was at a premium of $1.19 to WTI for the same month.
West Texas Intermediate for February delivery, which expires on January 20, dropped as much as 93 cents to $47.76 a barrel on the New York Mercantile Exchange. The more active March future fell as much as 96 cents to $48.17. The volume of all futures traded was 9 percent below the 100-day average for the time of day. Prices rose 0.7 percent last week.
Chinese regulators are tightening control of margin investing amid concern that a six-month, 63 percent stock surge is unsustainable and may lead to instability. The Shanghai Composite Index tumbled 7.7 percent, wiping out the year’s advance.
“It is indeed not supportive for oil prices,” Michael Poulsen, an analyst at Global Risk Management Ltd. in Middelfart, Denmark said of the decline in Chinese stocks. “Combined with one of the world’s worst-kept secrets – OPEC trying to wash out shale players – oil prices have had a rough ride.”