Oil tumbles after brief rebound; Brent back below US$60

[NEW YORK] Global crude oil prices slumped anew on Thursday, a day after a short-covering rally, as traders placed fresh bets the market would resume a six-month rout on worries about a supply glut.

Benchmark Brent and US crude tumbled US$2 a barrel each in late trading after initially extending Wednesday's short-covering, which lifted oil prices by more than US$3.

With Brent back below the psychologically-key level of US$60 a barrel and US crude under US$55, traders braced for more selling in a market that has lost about half its value since June. "We're continuing to search for a bottom and might even see another significant drop before the year-end," said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut.

While the market seemed to slide on renewed worries about oversupply, traders said some of the selling could have been due to position squaring ahead of Friday's expiry of the January front-month contract in US crude.

Some cited a Bloomberg report about a Nigerian port workers union suspending a strike, although workers in that dock union were only involved in container shipping in Lagos, not oil ports.

The slump set in at midmorning and accelerated in the last 30 minutes of trade. "Liquidity (was) at its highest at the open and close; lots of systems use (the) market on close orders to enter (and) exit," said Chandravir Ahuja at Kolmar Americas in Bridgeport, Connecticut.

Brent's front-month contract closed down US$1.91 at US$59.27 a barrel, after hitting a session low at US$59.17.

A broker suggested that Brent needed to rally and hold well above US$61 a barrel "to have any decent strength technically." In Wednesday's short-covering rally, Brent hit US$64.40 before closing at US$61.18.

US crude's front-month contract settled down US$2.36 at US$54.11, having fallen to US$54.05 earlier. It rose to US$58.98 the previous day.

Oil's near 50 per cent drop over the past six-months began on worries about fast-growing US shale oil supplies and accelerated after Opec's decision in November not to cut output.

Oil companies have, meanwhile, announced cuts in exploration and capital spending.

Chevron Corp has put on indefinite hold a plan to drill for oil in the Beaufort Sea in Canada's Arctic while Marathon Oil cut its capital expenditure for next year by about 20 per cent.

Canadian oil producers also deepened cuts in 2015 spending, as Husky Energy, MEG Energy and Penn West Petroleum joined those scaling back capital budgets.

REUTERS

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