Petroleum industries have been creating negative environmental and ecological impacts due to the formation of oilfield produced water (OPW) during refining processes. Graphene oxide (GO) as a chemical demulsifier was found non-recyclable; hence, it could cause environmental pollution. Thus, magnetic graphene oxide (M-GO) was proposed to prevent any possible contamination. In this work, GO, and M-GO were successfully synthesized and the produced M-GO composites were found coated with silica-coated magnetite (Fe3O4@SiO2) nanoparticles. As such, they possess excellent superparamagnetic properties. The demulsification tests demonstrated that 0.25 wt of M-GO aqueous suspension achieved 98.53 of demulsification efficiency on the as-prepared crude oil-in-water emulsion, which was more superior than GO as the suspending oil floccules attached to M-GO can be separated effectively using magnetic separation. The optimizations of the demulsification process were conducted, and significant findings were included as the major novelty of this work. The recycling tests have proven that M-GO can be reused to perform demulsification effectively for ten times. Despite being able to reduce the demulsification costs in the industry, this research suggests that the excellent properties of M-GO can minimize the risk of polluting the environment due to leakage of demulsifier through the application of magnetic separation. © 2020 Published under licence by IOP Publishing Ltd.