Oil prices resumed their slide on Monday, falling about 4 percent to wipe out some of the surge at the end of last week, on news that Iraq flooded a massively oversupplied oil market with record output last month.
Brent crude LCOc1, the global benchmark, was down $1.18 at $31.00 a barrel by 11:29 a.m. EST, down 3.7 percent from its closing price on Friday, when Brent surged 10 percent. The contract had traded to a 12-year low of $27.10 on Jan. 20, before the two-day rally.
U.S. crude CLc1 traded $1.40 lower at $30.79 a barrel. The contact had traded to a 13-year low of $26.19 on Jan. 20.
The losses came despite news that oil producer group OPEC was evaluating holding an extraordinary meeting. Qatar’s energy minister said a request for such a gathering was being discussed.
Iraq’s oil ministry told Reuters on Monday that the country had record output in December, with its fields in the central and southern regions producing as much as 4.13 million barrels a day. A senior Iraqi oil official said separately the country may raise output even further this year.
“The news that Iraq has probably hit another record builds on the oversupply sentiment,” said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam.
“The oversupply will keep markets depressed and prices low, and on the other hand short positions are in excessive territory,” he said.
Traders who had put on record short positions raced to close them out on Friday, causing a near-historic rally that was partially erased on Monday, adding to oil market volatility.
The advance of a blizzard toward the U.S. East Coast over the weekend sent crude futures up 15 percent over two days last week.
“The shorts have been very nervous in the past week and have looked for excuses to accept some profits. They found it in the ECB comments and the weather,” said Jim Ritterbusch of Chicago-based oil consultancy Ritterbusch & Associates, also referring to remarks by European Central Bank President Mario Draghi that fanned hopes for ECB monetary stimulus.
Analysts at Energy Aspects said Monday that global oil inventories would continue to fill in the next months, but should start to ease by mid-year.
However, OPEC’s Secretary-General Abdullah al-Badri said at an event in London that signs were already emerging that the market was rebalancing.