Oil sinks below $63 to lowest in over five-years on glut, weak demand

By Reuters

Dec 12, 2014 07:27 AM EST

Brent crude oil slipped on Friday to below $63 a barrel, its lowest since July 2009, on persistent concerns over a global supply glut and a sluggish demand outlook.

Brent is down roughly 9 percent this week, some 45 percent below its June peak above $115 per barrel.

Oil prices will likely come under further downward pressure, the International Energy Agency said as it cut its outlook for demand growth in 2015 and predicted that healthy non-OPEC supply gains were poised to aggravate the glut.

The agency, which coordinates the energy policies of industrialized countries, cut its outlook for global oil demand growth for 2015 by 230,000 barrels per day (bpd) to 0.9 million bpd on expectations for lower fuel consumption in Russia and other oil-exporting countries.

"It spells out the main scenarios that are in the market and said that stockpiles will be substantially bigger in the first half of 2015," said Bjarne Schieldrop, chief commodity analyst for SEB in Oslo.

The Organization of the Petroleum Exporting Countries (OPEC), which accounts for a third of global oil output, cut its 2015 demand forecast this week to the lowest in more than a decade.

"It's following the trend lower. The market has reacted strongly to the OPEC forecast cut, and it is focusing only on the negative," said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam.

He added that there was little technical support until the $50-55 level.

Brent was down 54 cents at $63.14 per barrel by 4:57 a.m. EST, having hit an intraday low of $62.75.

U.S. crude was down 74 cents at $59.21 a barrel, after falling to a low of $58.80, also the weakest since July 2009. The contract has lost about 10 percent this week.

Top energy consumer China released data on Friday showing near-record refinery runs in November, with factory output growth weaker than expected.

High Chinese oil demand, which has remained above 10 million bpd for the past three months, could help provide a floor for prices.

Remarks by Saudi Arabia's oil minister reiterating that the kingdom will not cut output, and a surprise jump in U.S. crude and distillate inventories, have driven down prices this week.

OPEC exporters are battling for market share. Kuwait has set the official selling price for crude sales to Asian buyers for January at $3.95 a barrel below the average of Oman/Dubai quotes, a trader said, its lowest since December 2008.

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