Brent crude fell on Tuesday despite support from a weakening US dollar as oversupply from major oil producers continued to push prices lower. Brent and US crude oil both hit 5-year lows yesterday before rebounding slightly. Richard Hastings of Global Hunter Securities said US crude would likely break below $50 in the next few trading days.
"It's an unstable situation once again," Hastings said. "We've broken through some of the levels that we saw that started to firm up over the last week or so." US crude was down 3 cents at $53.57 at 11:46 am EST (1646 GMT). Brent fell 36 cents a barrel to $57.52, on track for its second weakest month since the global financial crisis of 2008.
The two main market movers today are oversupply from the world's oil producers and a weaker US dollar, said Brian LaRose, a technical analyst with United-ICAP. A 27-point decline in the US dollar provided a little support to the market earlier in the day.But a "significant catalyst" is needed to prompt buying, and LaRose said that motivator has been absent. "Until we see some sort of technical evidence developing, then one has to be skeptical of picking a bottom," he said. Oil markets have been heavily oversupplied this year due to increasing output of high quality, light oil from US shale and lower-than-expected consumption as a result of faltering global economic growth.
Members of the Organisation of the Petroleum Exporting Countries including Libya have suffered supply disruptions in recent months, but this has had little impact on prices. There were expectations on Monday that the destruction of over a million barrels of oil by a fire at Libya's main oil port could push Brent over $60, but by the end of the day prices had fallen past previous lows.
"It's clear by now that the Libya story was a bit of an illusion," Hastings said. Investors awaited US inventory data for further signals on supply. The American Petroleum Institute is scheduled to release data on Tuesday while the US Department of Energy's Energy Information Administration will issue data on Wednesday. A Reuters poll forecast US 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 December 19.
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