Update: Brent falls more, Saudi Arabian king issues speech

[LONDON] Oil prices fell to fresh 5-1/2 year lows on Tuesday, extending losses after a 5 per cent plunge in the previous session as worries over a global supply glut intensified.

Brent crude fell close to US$51 a barrel, its lowest since 2009, with cuts to Saudi Arabia's official selling prices to Europe this week adding more pressure to the 55 per cent price rout since June.

Saudi Arabia's King Abdullah said in a speech read for him on Tuesday the country would deal with the challenge posed by lower oil prices "with a firm will" but gave no sign the world's top exporter was considering changing its policy of maintaining production in the face of fast-growing US shale supplies.

"We would need an indication that Saudi Arabia is considering output cuts," said Carsten Fritsch, a commodities analyst with Commerzbank.

The Saudi official price cuts on Monday added to bearish data over the weekend showing that Russia's 2014 oil output hit a post-Soviet-era high and December exports from Iraq, OPEC's second-largest producer, reached their highest since 1980.

Brent crude fell as low as US$51.23 a barrel on Tuesday, its lowest level since May 2009. It recovered slightly to US$51.95 at 1310 GMT, down US$1.16 on the day.

US crude was at US$48.94, down US$1.10, after falling to US$48.47, its lowest since April 2009.

Fritsch at Commerzbank said other countries including Iraq, Iran and Kuwait are likely to cut their official selling prices in the coming days. The United Arab Emirate cut its prices on Tuesday.

Jitters over political uncertainty in Greece, and a downward revision on Tuesday to Europe's December Composite Purchasing Managers' Index (PMI), raised questions about energy demand in Europe and compounded the bearish sentiment.

A slew of factors was keeping up the downward pressure on prices, analysts said, pointing to concerns about the Greek economy, high oil output from Russia, Iraq and the United States, and a stronger dollar. "The weak euro should be one of the reasons," said Tamas Varga of PVM oil brokerage in London.

"When the Saudis are cutting prices, the markets are not going to go higher."

In the face of official price cuts, markets shrugged off news about rising hostilities and lower oil production in Libya, as well as data showing the number of rigs drilling for oil in the United States fell for a fourth straight week.

US commercial crude oil and products stockpiles were forecast to have risen in the week ending Jan 2, a preliminary Reuters survey showed on Monday.

REUTERS