Brent drops below $60 as OPEC, Russia keep output steady amid glut

17 Dec 2014

SINGAPORE - Brent futures fell more than 1 percent on Wednesday, down for a sixth straight session, with persistent worries of a supply glut keeping prices near a 5-1/2 year low under $60 a barrel.

Oil prices skidded in recent weeks, with Brent down nearly $20 since the Organization of the Petroleum Exporting Countries (OPEC) decided to keep output steady in late November.

Non-OPEC member Russia, one of the world's top producers, has also indicated that it does not plan to cut output despite a glut in the world market.

Brent for February delivery fell 62 cents to $59.39 a barrel by 0601 GMT (01:01 a.m. EST).



The January contract, which expired in the prior session, hit a low of $58.50 on Tuesday - the weakest since May 2009 and off this year's high above $115 reached in June.

U.S. crude dropped $1.12 to $54.81 a barrel after touching the lowest since May 2009 at $53.60 on Tuesday.

"The story is still the same. Europe is weak, China is weak, and the U.S. economy is growing by a bit. It's a supply story," said Avtar Sandu, senior manager for commodities at Phillip Futures in Singapore.

"The only thing is that the markets are very oversold and oil is extremely cheap at these levels," he added.

Core Gulf OPEC members that declined to cut output at a Nov. 27 meeting signaled this week they are prepared to wait as long as six months to a year to see the market stabilize.

Saudi Arabia's relinquishing its role as oil price anchor has caused a catastrophic drop in the demand for inventory which has resulted in oil prices collapsing, said PIRA Energy Group.

Kuwait's oil minister said there were 1.8 million barrels a day of excess oil in the market currently and prices could pick up in the second half of 2015.

Russia Energy Minister Alexander Novak has said that Moscow would not cut output in 2015, even if pressure on its finances rose with the economy showing signs of a severe stress.

The ruble has been hit hard, prompting Russia's central bank to rush in to hike interest rates to halt a collapse in the currency.

In the United States, crude inventories rose by 1.9 million barrels last week, compared with analysts' expectations for a decrease of 2.4 million barrels, data from the American Petroleum Institute showed late on Tuesday.

REUTERS