Oil prices fell 3 per cent on Monday as Iraq announced record-high oil production feeding into a heavily oversupplied market, wiping out much of the gains made in one of the biggest-ever daily rallies last week.

Brent crude, the global benchmark, was down 93 cents at $31.25 a barrel at 0955 GMT, losing 3 per cent from its closing price on Friday, when Brent surged 10 per cent.

US crude traded $1.02 lower at $31.17 a barrel.

Iraq’s oil ministry told Reuters on Monday oil output had reached a record high in December. Its fields in the central and southern region produced as much as 4.13 million barrels a day, the government said.

“The news that Iraq has probably hit another record builds on the oversupply sentiment,’’ said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam.

“The oversupply will keep markets depressed and prices low, and on the other hand short positions are in excessive territory,’’ he said.

The closing of large amounts of short positions had caused a huge rally on Friday that was largely undone again on Monday, creating huge volatility in the oil market.

Fundamental factors influencing the oil market remained bearish.

Indonesia’s OPEC governor said that support among the Organization of Petroleum Exporting Countries for taking steps to prop up crude prices is slim, with only one OPEC country supporting an emergency meeting over the matter.

Striking a more bullish tone, the group’s Secretary-General Abdullah al-Badri said at a separate event in London that he saw some signs the market was rebalancing.

He also said OPEC and non-OPEC producers needed to work together to tackle oversupply in order to prop up oil prices.

The chairman of Saudi Aramco said on the sidelines of a different conference on Monday that oil prices would ultimately balance at a moderate level as demand continued to rise.

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