Oil falls to $30 on oversupply, China growth concern

By Alex Lawler

LONDON (Reuters) - Oil dropped to $30 a barrel on Tuesday, trading within sight of a 12-year low on concerns about excess supply and more signs of a Chinese economic slowdown.

An oil official in Kuwait downplayed the prospect of an emergency OPEC meeting and predicted 2016 would be tough with prices remaining low - underlining the slim chance of any deal among exporters to tackle excess supply.

Brent crude fell 62 cents to $29.88 a barrel by 0951 GMT. It reached $27.10, its lowest since November 2003, on Jan. 20. U.S. crude was down 54 cents at $29.80.

"The renewed wave of selling was sparked by another increase in risk aversion," Commerzbank analyst Carsten Fritsch said. "News of record-high oil supply from Iraq put pressure on prices."

Demand concerns also weighed. China's annual rail freight volume fell 11.9 percent in 2015 versus a drop of 3.9 percent in 2014, adding to worries about contracting economic activity in the second-largest oil consumer.

"Fears of a sharp slowdown in economic growth, particularly in China, are dragging down global stock markets from arguably overheated levels," analysts at Energy Aspects said in a report. "This is weighing on other risky assets, including oil."

Despite the price collapse and spending cutbacks across much of the industry, major OPEC producers are sticking to investment plans and some intend to boost supply.

The risk of prices staying low for a longer time is not deterring Kuwait from investing in energy projects, the head of Kuwait Petroleum Corp said on Tuesday, echoing similar comments from the chairman of Saudi Arabia's state oil company.

Iraq may further boost output this year, a senior Iraqi oil official, who asked not to be identified, said on Monday. Production hit a record in December.

Investors are now watching the U.S. Federal Reserve policy meeting starting later in the day, the first since the central bank raised interest rates in December, for clues on the movement of the dollar.

Underlining the supply glut, analysts expect the latest weekly reports on U.S. supplies to show crude inventories rose further. Crude inventories are already at the highest level since 1990.

The American Petroleum Institute, an industry group, releases its supply report at 2130 GMT and the government's data is due on Wednesday.

(Additonal reporting by Meeyoung Cho in Seoul; Editing by Dale Hudson)