NEW YORK: Oil fell more than 3 percent on Monday, heading for its biggest one-day percentage drop in a month due after an increase in U.S. crude drilling pointed to further supply growth.
The trade war between Washington and Beijing also weighed on futures as investors lost confidence that the two sides would soon end the months-long tariff fight that has damaged China's economy.
Brent crude oil futures tumbled $1.94, or 3.2 percent, to $59.70 a barrel by 12:20 p.m. EST (1720 GMT), while U.S. West Texas Intermediate crude slumped $2.12, or 4 percent, to $51.57 a barrel.
The last time Brent saw a daily percentage drop greater than 3.2 percent was Dec. 27, while WTI last fell more than 4 percent on Dec. 24.
"We're seeing oil prices really start to break down here," said Phillip Streible, senior market strategist at RJO Futures in Chicago. "One of the factors that played in is the rising rig count that we saw on Friday."
U.S. drillers last week added 10 oil rigs, bringing the total rigs operating to 862, according to energy services firm Baker Hughes on Friday.
Growing record U.S. crude production, which is just below 12 million barrels per day, has soured sentiment, traders said.
Scandinavian bank SEB said it had cut its 2019 oil price forecast to $65 a barrel from $85 previously, citing weakening demand in 2019 and 2020 and stronger-than-expected U.S. shale oil production.
SET FOR BIGGEST MONTHLY RISE SINCE 2016
Crude futures, however, remain on course for their strongest monthly gains in more than two years following production cuts by the Organization of Petroleum Exporting Countries and its allies this month. It also gained on robust trade in physical barrels of crude led by China.
Brent has risen nearly 12 percent so far in January, which would be the largest monthly percentage increase since December 2016. WTI has risen more than 13 percent this month, the biggest jump since April 2016, when it surged almost 20 percent.
Investors have added to bets on a sustained rise in the oil price this month for the first time since September, according to data from the InterContinental Exchange.
But much of the demand outlook hinges on China and whether its refiners will continue to import crude at 2018's breakneck pace.
Industrial companies in China reported a second monthly fall in earnings in December, despite the government's efforts to support borrowing and investment.