Crude futures fell today, dropping below $30 a barrel and extending the previous day's losses by more than 2 percent, as fresh worries about oversupply from top producers Saudi Arabia and Iraq spooked the market.

Global benchmark Brent crude  lost 72 cents, or 2.4 percent, to $29.78 a barrel  after hitting a session low at $29.76 a barrel. It settled down $1.68 at $30.50 in the previous session, 5.2 percent below its closing price on Friday.

U.S. crude fell 78 cents, or 2.6 percent, to $29.56 a barrel, after hitting a session low at $29.50. It fell $1.85, or 5.8 percent, to $30.34 a day earlier.

"Technical short-covering and a cold spell in the United States and some parts of the northern hemisphere had helped prices rally temporarily, most of which was wiped out if you look at yesterday's prices," said Kang Yoo-jin, a commodities analyst at NH Investment and Securities based in Seoul.

"Psychological factors have driven the severe volatility in the market," added Kang, who said the situation was likely to persist until concerns over oversupply were lifted.

Iraq's oil production hit a record in December, as output increased from the central and southern fields, an oil ministry spokesman said yesterday.

Meanwhile, Iraq may raise output further this year, reaching levels as high as 4 million barrels per day (bpd) from the country's south, a senior Iraqi oil official said. Current production has been around 3.7-3.8 million bpd.

At the same time, national oil giant Saudi Aramco is continuing to invest in oil and gas production capacity despite cost-cutting due to low prices, its chairman said.

Senior OPEC and Russian oil industry officials stepped up vague talk of possible joint action to remedy one of the worst supply gluts in decades, while Saudi Arabia signalled its resolve to allow the market to balance itself.