Brent crude fell to a 5-1/2-year low of less than $57 a barrel on Tuesday as a global supply glut outweighed concerns of lost supply from Libya where battling militias have closed ports.
The oil benchmark recovered ground later but was on track for its second weakest month since the global financial crisis of 2008, and traders said the sell-off that has halved crude prices in six months showed no sign of coming to an end.
Brent LCOc1 fell $1.14 a barrel to $56.74, its lowest since May 2009, before recovering to trade around $57.70, down 18 cents, by 9.40 a.m.
U.S. crude CLc1 was up 10 cents at $53.71 after hitting $52.70 – also its lowest since May 2009.
Oil markets have been heavily oversupplied this year due to increasing output of high quality, light oil from U.S. shale and lower-than-expected consumption as a result of faltering global economic growth and competition from alternative fuels.
Several members of the Organization of the Petroleum Exporting Countries have suffered supply disruptions in recent months, but this has had little impact on prices.
In Libya, clashes between rival factions have closed oil ports and terminals this month, reducing exports from the OPEC producer, which used to sell over 1 million barrels per day of crude to world markets, to almost nothing.
OPEC, which pumps a third of the world’s oil, had been expected to trim output to try to stabilize prices, but it decided in November to keep production unchanged and let the market find its own level.
PVM Oil Associates analyst Tamas Varga saw no let-up in the sell-off, saying “the bears” were in firm control of the market.
“The trend is still down and supports are expected to be under pressure. It is not recommended to go against this trend.”
Reuters technical analyst Wang Tao said Brent may fall to $54.98 while U.S. oil is expected to drop to $52.10.
Investors awaited U.S. inventory data. The American Petroleum Institute was scheduled to release data on Tuesday while the U.S.
Department of Energy’s Energy Information Administration will issue data on Wednesday.
A Reuters poll forecast U.S. crude inventories would show a drop of 900,000 barrels, after a rise to their highest recorded level for December in the week ended on Dec. 19. (Reuters)