Brent crude prices fell again on Tuesday to a five-year low, dropping below US $66 a barrel after plunging over 4 per cent on Monday on worries of a swelling oil supply glut.
Oil prices are likely to remain around US $65 a barrel for the next six or seven months, the chief of Kuwait's national oil company said on Monday, in the latest sign that Gulf producers are ready to ride out slumping prices.
Industry sources said on Tuesday top oil producer Saudi Arabia will keep oil supplies at full contracted volumes for Asian term buyers in January.
Brent crude price for January delivery hit an intra-day low of US $65.33 on Tuesday, its lowest since September 2009. The benchmark was trading 83 cents lower at US $65.36 by 1:00 pm.
Brent prices dropped US $2.88 on Monday, to settle at US $66.19 a barrel, its third-largest single-day loss in 2014.
"Short term sentiment is to remain weak for crude oil, given the oversupply expected in 2015," ANZ analysts said in a note.
Norwegian brokerage DNB Markets cut its outlook for Brent crude by US $10 for 2015 and by US $5 for 2016 on Tuesday, noting that Brent prices in the US $50-level is a possibility.
"Although talks of oil reaching its bottom are more rampant, we fail to see a reversal coming without stronger fundamentals," said Daniel Ang of Phillip Futures in a note, adding that Brent crude for February delivery could fall as low as US $60.
Brent crude prices have fallen more than 40 per cent since June, with losses growing in late November after the Organization of the Petroleum Exporting Countries (OPEC) decided against cutting its output target.
Since then, Saudi Arabia has cut monthly prices for the crude it sells to the United States and Asia, a move that analysts say shows it is stepping up its battle for market share.
US crude prices dipped 55 cents to US $62.50 a barrel on Tuesday, after briefly hitting US $62.25, its lowest since July 2009. The fuel's price fell by 4.2 per cent, or US $2.79, to end at US $63.05 on Monday.
It remains to be seen when the price slump will slow the US shale boom. New US projections show production from the big three US shale plays should carry on growing at more than 100,000 barrels per day into January.
However, many companies are already starting to make deep cuts to spending for 2015.