Amid Supply Glut, Oil Continues Decline

Reuters

Brent crude oil fell below $59 a barrel on Wednesday, near 5-1/2-year lows, as major oil producers signaled that they would maintain output despite a supply glut and faltering demand in Russia and Europe.

Core Gulf OPEC members have said they are prepared to wait as long as a year for the market to stabilize, undercutting hopes they will step in to stem crude price losses.

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Oil prices have almost halved over the last six months as increasing volumes of light, high-quality crude from North American shale have overwhelmed demand.

"Every day now you have some Gulf OPEC member actively trying to talk the market down," said Olivier Jakob, oil analyst at Petromatrix. "OPEC is trying to choke U.S. oil producers."

Brent for February was down by $1.20 to $58.81 a barrel at 7:38 a.m. EST. The January Brent contract, which expired in the prior session, hit a low of $58.50 on Tuesday, its weakest since May 2009.

U.S. crude dropped by $1.70 to $54.23 a barrel, after touching its lowest since May 2009 at $53.60 on Tuesday.

On Wednesday, Iraqi Kurdistan government officials said Iraqi crude oil exports to the Turkish port of Ceyhan could reach 800,000 bpd next year, higher than previously announced. Oil shipments from Angola, Africa's second-largest exporter, are also set to increase in February to 1.86 million barrels per day.

Russian Energy Minister Alexander Novak has said Moscow will not cut output in 2015, even if pressure on its finances rises with the economy showing signs of severe stress.

The ruble has been hit hard, prompting Russia's central bank to begin selling part of its foreign-currency holdings worth $7 billion in an effort to halt a collapse in the currency.

European shares opened lower as the market reacted to fears over the crisis in Russia, which has sparked further concerns about energy demand growth.

"The weak demand increases the amount of supply that must be removed from the market," said Carsten Fritsch, an analyst with Commerzbank.

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 on Tuesday.

Analysts said stock data from the U.S. Energy Information Administration due on Wednesday could also weigh on market sentiment. [API/S] [EIA/S]

"Unless we see a huge drop in U.S. stocks ... it will be bearish," Fritsch said.

(Additional reporting by Seng Li Peng in Singapore; Editing by Christopher Johnson and Jason Neely)