Oil. Picture: REUTERS
Oil. Picture: REUTERS

London — Oil prices plunged more than 1.5% to below $61 a barrel on Monday, extending last week's heavy losses as deepening US trade wars fanned fears of a global economic slowdown.

Saudi Arabia, the de-facto leader of Opec, sought to stem the price slide with assurances that the group of oil producers together with Russia would continue managing global crude supplies to avoid a surplus.

Front-month Brent crude futures were at $60.96 at 8.44am GMT, down $1.03 or 1.7% below Friday's close. Prices had dropped more than 3% on Friday, with May recording the biggest monthly loss in six months.

US West Texas Intermediate (WTI) crude futures were at $52.98 per barrel, down 52 US cents, or 1%.

Global markets have reeled in recent weeks over concern that the global economy could stall amid rising trade tension between the US and China, the world's two largest economies and biggest energy consumers.

Fears over trade were further stoked when US President Donald Trump announced punitive tariffs against Mexico, a key oil supplier to the US.

"Traders are increasingly pricing in a prolonged trade war hitting the global economy," said Jasper Lawler, head of research at futures brokerage London Capital Group.

In a typical market move during times of uncertainty, gold rose to its highest level in over two months on Monday as investors pulled out of risky assets like oil and parked money in perceived safe havens such as the precious metal.

Supply assurances

Brent crude oil prices have dropped almost 20% from their 2018 peak as global supplies tightened due to output curbs by oil cartel Opec and Russia, as well as a drop in Iranian exports due to US sanctions and Venezuelan production.

Saudi Arabia, the world's top exporter, pumped 9.65-million barrels of oil per day (bpd), cutting deeper than its production target under a global pact to reduce oil supply, a Saudi oil industry source said on Monday.

The Saudi output target under the Opec-led pact is 10.3-million bpd.

"Supply side fundamentals don't matter at the moment as market participants are entirely focused on demand concerns," said Commerzbank's Carsten Fritsch at the Reuters Global Oil Forum.

US drillers this week increased the number of oil rigs operating for the first time in four weeks. Weekly production last stood at a record 12.3-million bpd.

Reuters