Oil falls as record Iraqi output seen compounding surplus

Oil dropped after Iraqi crude production surged to a record and the International Monetary Fund (IMF) cut its global growth outlook.

Crude fell as much as 4.9 percent in New York and 2.2 percent in London. Iraq is pumping 4 million barrels a day and will boost exports, oil minister Adel Abdul Mahdi said at a news conference in Baghdad.

The IMF made the steepest reduction to its global-growth outlook since January 2012 in its quarterly global outlook Monday. Projections for the euro area, Japan, China and Latin America were trimmed.

Oil slid more than 50 percent since June as the U.S. pumped at the fastest pace in more than three decades and the Organisation of Petroleum Exporting Countries resisted calls to reduce production. Goldman Sachs Group Inc. and Societe Generale SA were among banks to reduce their price forecasts last week.

“We continue to get news of rising supplies and a shaky economy.” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said. “The surge in Iraqi production is going to add barrels to an oversupplied market. The IMF report was lousy and further crimps the demand outlook.”

Brent for March settlement fell 56 cents, or 1.2 percent, to $48.28 a barrel on the London-based ICE Futures Europe exchange, following a 2.7 percent drop Monday. Volume for all futures traded was 13 percent higher than the 100-day average. The European benchmark crude traded at a $1.18 premium to the March WTI contract.

The IMF made the deepest reductions in places suffering from crises, such as Russia, or for oil exporters including Saudi Arabia.

The U.S. was the exception, with an upgrade to the forecast for the world’s largest economy to 3.6 percent growth in 2015, up from 3.1 percent in October.

Gross domestic product in China, the world’s second-biggest oil consumer, rose by 7.3 percent in the three months ended December compared with a year earlier, the National Bureau of Statistics reported in Beijing.

China will account for 11 percent of global oil demand this year, compared with 21 percent for the US, according to forecasts from the Paris-based International Energy Agency.

OPEC, which supplies about 40 percent of the world’s crude, maintained its output quota of 30 million barrels a day at a meeting on November 27.

The 12-member group pumped 30.2 million a day in December, exceeding its target for a seventh straight month, data compiled by Bloomberg show. OPEC is next scheduled to meet June 5 in Vienna.