LONDON: Brent crude oil hit a fresh five-year low on Tuesday before rebounding to near $67 a barrel, as some buyers emerged in the hope that prices are bottoming following a more than 40 percent slide since June.
Fast-growing U.S. shale output has hurt the ability of the Organization of the Petroleum Exporting Countries to manage supplies, sending prices sharply lower in anticipation of a large oil glut early next year.
"Although talks of oil reaching its bottom are more rampant, we fail to see a reversal coming without stronger fundamentals," Daniel Ang of Phillip Futures said in a note.
Brent crude for January delivery was up 65 cents at $66.84 a barrel by 1123 GMT after falling as low as $65.29, its weakest since September 2009. Brent dropped 4.2 percent or $2.88 on Monday in its third-largest one-day loss this year.
U.S. crude was up 93 cents at $63.98 a barrel, bouncing back after hitting $62.25, its lowest since July 2009. It fell 4.2 percent or $2.79 on Monday.
Commodity prices took some support on Tuesday from a dip in the dollar, which slid by about 0.3 percent against a basket of currencies, though it remains up more than 12 percent since May. A weaker U.S. unit makes commodities priced in the dollar cheaper for holders of other currencies.
Supply and demand will set the price of oil in coming months, an oil official from the United Arab Emirates said on Tuesday, in the latest sign OPEC Gulf producers are ready to weather lower prices after declining to cut output last month.
Industry sources said top OPEC exporter Saudi Arabia would keep crude sales at full contracted volumes for Asian term buyers in January, while the head of Kuwait's national oil company said on Monday oil would remain around $65 for months.
Norwegian brokerage DNB Markets said excess supplies could push Brent down to the $50s in the first half of 2015 as it lowered its average year forecast by $10 to $70 per barrel.
Brent averaged around $110 between 2011 and 2013 and topped $115 in June. Losses accelerated in late November after OPEC decided against reducing its output target, despite its forecasts of a surplus and calls from members including Iran and Venezuela to cut production.
Since then, Saudi Arabia and second-largest OPEC producer Iraq have cut monthly prices for the United States and Asia, in a move some analysts say shows OPEC members are competing for market share.
New U.S. projections show oil production from the big three U.S. shale plays should grow by more than 100,000 barrels per day by January.
However, many shale companies are starting to make deep cuts to spending for next year.
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