Oil price drops again as Iraq’s output reaches record level

Oil prices fell as much as 5 per cent yesterday, wiping out some of the surge at the end of last week, as investor focus returned to the market’s oversupply amid news Iraq’s output reached a record last month.

US crude had traded $1.52 lower to $30.67 a barrel, a loss of 4.7 per cent, by yesterday evening. Brent crude, the global benchmark, was $1.28 weaker at $30.90 a barrel, 4 per cent below its closing price on Friday, when Brent surged 10 per cent.

The biggest two-day rally since 2008 on Thursday and Friday helped put a stop to what analysts called an “irrational” sell-off that had sent oil prices crashing more than 20 per cent in January.

Brent hit a 12-year low of $27.10 on January 20th, before the two-day rally, while US futures hit a 13-year low of $26.19, below the pivotal $30 levels.

The 15-per cent rebound came as traders raced to close out short positions, and a monster blizzard moved toward the US east coast. It was almost the largest two-day rally in history, while the renewed selling yesterday added to oil market volatility.

Iraq’s oil ministry said yesterday the country had record output in December, and a senior official said the country may raise output even further this year.