LONDON: Oil fell towards six-year lows on Monday, on data showing the economy of Japan, the world's third biggest oil consumer, contracted in the second quarter.
The global oversupply picture was exacerbated by another weekly jump in US oil rig additions, hinting at growing production, and news that Oman produced a record-breaking 1 million barrels a day in July.
US crude, or West Texas Intermediate (WTI), for September was trading 36 cents lower at $42.14 a barrel at 1038 GMT, close to its lowest level in more than six years. Brent for October edged back, up 22 cents at $49.41 a barrel, having reached an intraday low of $48.35.
This was a few dollars shy of its six-year low of $45.19. The September contract expired on Friday.
Over the past two weeks, US crude prices have fallen by more than 10 percent on US supply concerns. Brent has fallen at a slower rate of around 4 percent.
"We have seen Brent swing up and down over the past two weeks because of a lack of consensus about where oil should go directionally," BNP Paribas energy commodities strategist Gareth Lewis-Davies said.
Production by the Organization of the Petroleum Exporting Countries is running well above demand filling stockpiles worldwide. Iran is expected to increase its oil exports once Western sanctions are lifted after ratification of a recent nuclear deal.
"The oversupply story remains well intact, which fuels the bearish sentiment," said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.
Many analysts expect prices to remain depressed as bearish factors hinting at sustained oversupply are set to persist.
"The end of the summer driving season and the start of refinery maintenance season will weigh on near-term demand and pressure prices," said Societe Generale oil analyst Michael Wittner.
"Oversupply, high stocks, and seasonal weaknesses are outweighing record demand growth," he added.
Demand for crude oil is set to fall in the next few weeks as refineries start annual maintenance.
A number of European refineries will close for maintenance in September and October, including Royal Dutch Shell, Statoil and Total .
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