Brent drops towards five-year low near $57, supply glut weighs

By Reuters

Dec 30 2014, 00:37 AM EST

Brent oil extended losses into a fourth session on Tuesday, with prices hovering close to a more than five-year low above $57 per barrel, as persistent worries about a global supply glut offset concerns about output disruptions in Libyan.

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 December in the week ended on Dec. 19. [EIA/S]

Brent for February delivery fell 25 cents to $57.63 as of 0528 GMT, after tumbling to $57.37 in the previous session, the lowest level since May 2009.

U.S. crude for February delivery fell 28 cents to $53.33 after it settled down $1.12 on Monday, when it hit an intraday low of $52.90 - also 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.

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

The 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 is heading for its biggest annual drop in dollar terms.

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