Oil dropped below $50 (£41.15) for the first time since December after concerns that OPEC's output cuts aren’t tempering a surplus in the US triggered the biggest slump in more than a year.

Futures dropped as much as 2.2 per cent in New York to $49.20 after losing 5.7 per cent the previous three sessions. Stockpiles rose 8.2 million to the highest level in weekly government data since 1982.

Harold Hamm, the US shale oil billionaire, warned on Wednesday that the industry could “kill” the crude market if it embarks on another spending binge.

Oil had fluctuated above $50 a barrel since the Organisation of Petroleum Exporting Countries and other nations started trimming supply for six months starting on 1 January to reduce a global glut. While US shale production has rebounded, larger-than-expected cuts elsewhere and signs of growing demand suggest stockpiles will decline, according to Goldman Sachs.

“The bottom line here is you have wide compliance within OPEC with the production cuts and on the other hand you have increased production out of the US,” Hans Goetti, chief strategist for the Middle East and Asia at Banque Internationale a Luxembourg, said in a Bloomberg television interview. “The shale oil industry in the US has made great strides to cut costs.”

West Texas Intermediate for April delivery dropped 74 cents, or 1.5 per cent, to $49.54 a barrel on the New York Mercantile Exchange at 10:17am in London. Total volume traded was about 60 per cent above the 100-day average. The contract lost $2.86, or 5.4 per cent, to $50.28 on Wednesday, the biggest decline in percentage terms since February 2016.

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Brent for May settlement fell as much as $1.09 a barrel, or 2.1 per cent, to $52.02 a barrel on the London-based ICE Futures Europe exchange. Prices dropped $2.81, or 5 per cent, to $53.11 on Wednesday. The global benchmark crude traded at a premium of $2.32 to May WTI.

Saudi Arabia’s Oil Minister Khalid Al-Falih said this week global inventories are falling slower than expected, opening the door to extend the output-cut deal beyond its initial six months.

US crude production increased for a third week to 9.09 million barrels a day, the Energy Information Administration said Wednesday. The nation’s output is projected to surge to a record 9.73 million barrels a day next year, according to the EIA’s monthly Short-Term Energy Outlook on Tuesday.