Oil prices plunged three per cent on Monday, January 25, as Iraq announced record-high oil production, feeding into a heavily over-supplied market.
Iraq’s oil ministry said oil output had hit a record high in December. Its fields in the central and southern regions produced as much as 4.13 million barrels a day, the government said.
The oversupply has wiped out much of the gains made in one of the biggest-ever daily rallies last week.
Brent crude, the global benchmark, was down 83 cents at $31.35 a barrel at 1247 GMT, losing 2.6 per cent from its closing price on Friday, when Brent surged 10 per cent. U.S. crude traded 85 cents lower at $31.34 a barrel. A senior Iraqi oil official said the country might 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.”
The closing of large amounts of short positions had caused a huge rally on Friday that was largely undone again on Monday, creating huge volatility in the oil market.