Brent hits 5-1/2-year low near $57, supply glut weighs

Brent oil fell to a fresh 5-1/2-year low near $57 per barrel on Tuesday, as persistent worries about a global supply glut offset concerns about output disruptions in Libya.

Forecasts for a 900,000-barrel draw in oil stocks last week in top consumer the United States, however, checked further losses. A draw would follow a rise to the highest recorded level for

Brent for February delivery fell 56 cents to $57.32 as of 0626 GMT, after hitting a low of $57.25 earlier in the session – the lowest level since May 2009.

U.S. crude for February delivery fell 49 cents to $53.12 after settling down $1.12 on Monday, when it hit an intraday low of $52.90 – the lowest since May 2009.

“There’s no sign of any reduction of output by OPEC,” said Ken Hasegawa, commodity sales manager at Tokyo’s Newedge Japan.

He said Brent could drop to $55 a barrel and U.S. crude to $50 a barrel early next year.

Reuters technical analyst Wang Tao said Brent may fall more to $54.98, as it has resumed its downtrend, while U.S. oil is expected to drop to $52.10, as indicated by its wave pattern and a Fibonacci projection analysis.

Traders are now eyeing weekly U.S. inventory data.

An industry group, the American Petroleum Institute, is scheduled to release its report later in the day, while the U.S. Department of Energy’s Energy Information Administration will release its data on Wednesday.

“A potential surprise draw in U.S. oil stocks would give a short-term fillip to the upside,” said Michael McCarthy, chief market strategist at Sydney’s CMC Markets.

Supply disruptions in Libya, which is producing 128,000 barrels per day from fields linked to the eastern port of Hariga after fighting halted operations at the key export ports Es Sider and Ras Lanuf, also supported oil prices.

“Libya is not a major producer but the disruption could be a trigger for a mini-rally,” McCarthy said.

Oil prices this year have been hammered by rising global supply and more recently by OPEC’s reluctance to cut output. Brent, which has shed more than $50 this year, is on track for its biggest annual drop in dollar terms.

The European benchmark and U.S. crude are set to post their biggest percentage declines in a year since 2008.

Source: Reuters