HONG KONG (BLOOMBERG) - Oil traded below US$31 a barrel after US crude stockpiles rose to the highest in more than eight decades as Saudi Arabia and Russia propose to freeze output amid a worldwide surplus. Iraq backs any decision to support prices and balance the market, Oil Minister Adel Abdul Mahdi said in a statement, without saying whether it would cap its own production.

Futures lost as much as 1.4 per cent in New York, trimming the first weekly advance this month. US inventories expanded to 504 million barrels, the highest level in data going back to 1930, according to the Energy Information Administration.

West Texas Intermediate for March delivery, which expires Monday, fell as much as 42 cents to US$30.35 a barrel on the New York Mercantile Exchange and was at US$30.45 at 9:14 am Hong Kong time. Prices are up 3.4 per cent this week.

Brent for April settlement declined as much as 54 cents, or 1.6 per cent, to US$33.74 a barrel on the London-based ICE Futures Europe exchange. Prices are 1.5 per cent higher this week.

Oil is still down 18 per cent this year after the Organization of Petroleum Exporting Countries abandoned output targets in early December and as US inventories swelled. Iran, , will delay the start date for sales of a new heavy grade to June to give buyers more time to test the crude in their refineries.

"Inventories continue to build," Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone.

"Not only is there downside risks to prices but there is also obvious limits to any upside potential. Iran has an argument that having been out for so long, they've got a right to production and some other producer needs to cut back."

OPEC was second-biggest producer until sanctions were intensified in 2012. Last month, Europe and the United States announced they would lift sanctions against Tehran following an agreement on the country's nuclear programme.