Oil at Six-Month Low as OPEC Ramps Up

Brent hits lowest since late January as OPEC oil output hits new high in July.

Oil hit six-month lows on Monday, knocked by fresh evidence of growing oversupply and data highlighting slowing demand in China, leaving crude prices on course for their weakest third-quarter performance since the financial crisis in 2008.

A Reuters survey last week showed oil output by the Organization of the Petroleum Exporting Countries (OPEC) reached the highest monthly level in recent history in July.

Saudi Arabia and other key members are showing no sign of wavering in their focus on defending market share instead of prices, which have fallen 9 percent this year.

The lack of a plan by OPEC to accommodate the return of more Iranian oil further fuelled supply worries. Iran expects to raise output by 500,000 barrels per day (bpd) as soon as sanctions are lifted and by a million bpd within months, its Oil Minister Bijan Zanganeh has said.

"The market seems to again focus on the supply situation ... one of the difficulties is that Iran may be coming back and there is no obvious sign that OPEC will make room for them," Ric Spooner, chief market analyst at CMC Markets in Sydney said.

Brent crude oil fell $1.10 to $51.11 a barrel by 1055 GMT, having touched a low of $50.85 earlier in the day, its weakest since Jan. 30.

The price has lost nearly 20 percent so far in the third quarter, which would make this the biggest slide for the three months from July to September since 2008.

U.S. crude fell 71 cents to $46.41 after hitting the lowest in four months at $46.35.

Growth in Chinese manufacturing activity unexpectedly stalled in July as demand at home and abroad weakened, an official survey showed on Saturday, adding to concern about the economy stemming from this quarter's 15-percent drop in Chinese stock markets.

Hedge funds and other speculators have slashed their bullish exposure to U.S. crude, or WTI, to the lowest in nearly five years, trade data showed on Friday, as local drillers continue to add rigs and pump at full throttle despite a global oil glut.

"The Reuters survey on OPEC production is bearish, rig count is bearish ... the dollar is a touch stronger and the Chinese stock market is also down," said PVM Associates analyst Tamas Vargas.

Vargas added he thought it more likely that Brent would trade closer to $40 by the end of the year than to $70, because of how quickly growth of supply is outpacing that of demand.

By Amanda Cooper