Investing.com - Oil futures fell in Europe trade on Monday, as a massive short-covering rally which took prices to an almost two-week high in the prior session ebbed.
On the ICE Futures Exchange in London, Brent oil for April delivery shed 52 cents, or 1.57%, to trade at $32.33 a barrel by 08:05GMT, or 3:05AM ET.
London-traded Brent futures soared nearly $3, or 10%, on Friday, as expectations for fresh central bank stimulus in Europe and Japan prompted traders to close out bets on lower prices, a move known as short-covering.
Brent futures gained $3.45, or 11.2%, last week, snapping a three week losing streak. Despite recent gains, Brent prices are still down almost 13% since the start of the year.
Brent sank to $27.10 on January 20, a level not seen since October 2003, as lingering concerns over China’s economic outlook added to the view that a global supply glut may stick around for much longer than anticipated.
Elsewhere, crude oil for delivery in March on the New York Mercantile Exchange dipped 32 cents, or 1.01%, to $31.86 a barrel. Nymex prices jumped $2.66, or 9.01%, on Friday. Market analysts viewed the surge as a classic dead-cat bounce from oversold conditions.
New York-traded oil futures rose $2.99, or 9.42%, last week, the first weekly gain in a month. The U.S. benchmark is still down nearly 14% this month amid ongoing concerns over a global supply glut.
U.S. oil futures plunged below $27 last week for the first time since September 2003, as investors worried that a huge oversupply in crude was coinciding with an economic slowdown, especially in China.
China is the world's second largest oil consumer after the U.S. and has been the engine of strengthening demand.
Global crude production is outpacing demand following a boom in U.S. shale oil and after a decision by the Organization of the Petroleum Exporting Countries last year not to cut production in order to defend market share.
Oversupply issue will be exacerbated further as Iran plans to return to the global oil market after western-imposed sanctions were lifted earlier this month. Analysts say the country could quickly ramp up exports by around 500,000 barrels.
The surge in Iranian shipments is viewed as bearish for crude, which has fallen approximately 75% from its peak of $115 two summers ago, amid a glut of oversupply on markets worldwide.
Most market analysts expect a global glut to worsen in the coming months due to soaring production in North America, Saudi Arabia and Russia.
Meanwhile, Brent's premium to the West Texas Intermediate crude contract stood at 47 cents, compared to a discount of 1 cent by close of trade Friday.