Oil prices fall to five-year low as supply glut continues

Brent oil has fallen to a five-and-a-half-year low under $57 per barrel, as persistent worries about a global supply glut offset concerns about output disruptions in Libya.

Brent for February delivery fell 98 cents to $56.90 as of 8.30am after hitting $56.74 earlier in the session - the lowest level since May 2009.

US crude for February delivery fell 77 cents to $52.84 after settling down $1.12 on Monday. It earlier hit $52.70 - also its 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 US crude to $50 a barrel early next year. Reuters technical analyst Wang Tao said Brent may fall to $54.98, as it has resumed its downtrend, while US oil is expected to drop to $52.10, as indicated by its wave pattern and a Fibonacci projection analysis.

Traders are now eyeing weekly US inventory data. An industry group, the American Petroleum Institute, is scheduled to release its report later in the day, while the US Department of Energy's Energy Information Administration will release its data on Wednesday.

"A potential surprise draw in US 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 US crude are set to post their biggest percentage declines in a year since 2008.

Reuters