Oil continued to fall, dipping towards 12-year lows, as concerns persisted over excess supply and slowing demand.

Oil futures dropped to their lowest levels since 2003 this week as investors worry that a glut of crude is combining with slowing demand due to economic weakness, especially in China.

International benchmark Brent was down 17 cents at $27.71 a barrel by 1052 GMT. Brent has lost 26 per cent so far in January, on track for its biggest monthly fall since 2008.

Front-month West Texas Intermediate (WTI) crude futures traded at $28.17 per barrel, down 18 cents from their previous close.

Broad market sentiment remained bearish as producers around the world pump 1 million to 2 million barrels of crude every day in excess of demand, creating a huge overhang of stored oil.

Iran’s return to the oil market this month added to the glut, after the lifting of international sanctions aimed at discouraging the country from obtaining nuclear weapons.

"There are worries surrounding demand and oversupply," said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam.

He said weaker demand in the Middle East, which has been hit by lower oil prices, could add fuel to the sell-off and there was little to stop crude falling to $20 per barrel.

Indicating the glut may grow further, Iraq’s Oil Minister Adel Abdul Mahdi told Reuters the country’s southern region planned to increase output by up to 400,000 barrels per day (bpd) this year to over 4 million bpd.

Concerns are also growing that China’s economy could slow further and cut demand in the world’s second-largest oil consumer.

"Lower commodity and oil prices reflect weakening demand," HSBC said on Thursday.

Meanwhile, Venezuela has requested that Opec hold an emergency meeting to discuss steps to prop up oil prices, although delegates from other members of the producer group said such a gathering was unlikely.

Reuters