Crude oil futures hit four-month lows on Monday after a steep drop in China’s stock markets spread concerns about the economic health of the world’s biggest energy consumer, amid evidence of a growing crude glut.
Oil was also pressured by the sharp increase in U.S. drilling activity last week, after data on Friday showed producers adding 21 rigs, the most in over a year, suggesting a ramp up in output as crude futures recovered from six-year lows seen in the first quarter.
Chinese stocks tumbled more than 8 percent in Asian trading, the biggest one-day drop in eight years that drove European equities markets to a two-week low.
Brent crude oil was down 95 cents, or 1.7 percent, at $53.67 a barrel by 11:35 a.m. EDT (1535 GMT). It hit $53.33 earlier, its lowest since late March.
U.S. crude CLc1 slipped 55 cents, or 1.2 percent, to $47.59, after hitting $47.20, its lowest since April 1.
“The combination of the Chinese stock market rout and creeping crude glut is weighing on oil,” said Carl Larry, director of business Development for oil and gas at Frost & Sullivan.
“That said, Brent’s still seeing support above $50 and U.S. crude is staying above $45. There’s a lot of hedging going on at those levels.”
Global oil supplies remain ample, with major producers in the Middle East Gulf competing for market share and pumping 2-3 percent more than needed, analysts say.
Exports from Iraq’s southern oilfields were on track to a monthly record, having topped 3 million barrels per day so far this month.
“In the next couple of months, even if the global oversupply and seasonal weakness are becoming priced in, it is difficult to see where any price uplift will come from,” said Societe Generale oil analyst Michael Wittner.
Speculators have also cut their bets on a longer-term rise in oil prices, InterContinental Exchange data showed.
Hedge funds and other money managers slashed their net long positions on Brent for the first time in four weeks in the week to July 21.
Investors will also look to the U.S. Federal Reserve for direction this week. The Fed on Tuesday starts a two-day policy meeting, amid rife speculation of a September rate hike that could boost the dollar.