SEOUL (REUTERS) - Crude futures extended falls on Tuesday (Jan 26) to retest the US$30 a barrel level, as the market was spooked by news that Iraq's output hit a record high and after Saudi Arabia pledged to maintain energy investment.
Global benchmark Brent crude lost 37 cents to US$30.13 a barrel by 0129 GMT after hitting a session low of US$30. It settled down US$1.68 at US$30.50 in the previous session, 5.2 per cent below its closing price on Friday.
US crude fell 43 cents to US$29.91 a barrel, after hitting a session low at US$29.61. It ended US$1.85, or 5.8 per cent, lower at US$30.34 a day earlier.
"Technical short-covering and a cold spell in the United States and some parts of the northern hemisphere had helped prices rally temporarily, most of which was wiped out if you look at yesterday's prices," said Kang Yoo-jin, a commodities analyst at NH Investment and Securities based in Seoul.
"Psychological factors have driven the severe volatility in the market," added Mr Kang, who said the situation was likely to persist until concerns over oversupply were lifted.
Iraq's oil production hit a record in December, as output increased from the central and southern fields, an oil ministry spokesman said on Monday.
Meanwhile, Iraq may raise output further this year, reaching levels as high as 4 million barrels per day (bpd) from the country's south, a senior Iraqi oil official said.
At the same time, national oil giant Saudi Aramco is continuing to invest in oil and gas production capacity despite cost-cutting due to low oil prices, its chairman said on Monday.
Mr Kang said the market would also be looking at exact oil volumes supplied by Iran and the United States, as well as any shifts in other Opec members over output.
Senior Opec and Russian oil industry officials stepped up vague talk on Monday of possible joint action to remedy one of the worst supply gluts in decades, while Saudi Arabia signalled its resolve to allow the market to balance itself.
In the United States, commercial crude and gasoline inventories probably rose last week, while distillate stocks likely fell, a preliminary Reuters survey showed.
Asian shares look set to retreat as fears of a global economic slowdown show no sign of abating.
Investors are closely watching the US Fed policymakers meetings on Tuesday and Wednesday for the first time since raising interest rates in December. While no move is expected, they will parse their statement to see how recent events have influenced its outlook.