Oil dives 4% to five-year low as selling snowballs

NEW YORK — World oil prices slid another 4 per cent to new five-year lows on Monday, as expectations of a deeper slump next year and a prediction by a core member of the Organisation of Petroleum Exporting Countries (OPEC) that crude will remain at $65 for several months triggered another round of selling.

The chief executive of Kuwait's national oil company said oil prices were likely to remain around $65 a barrel for the next six to seven months, the latest indication that Gulf producers were content to ride out the latest rout.

The pessimistic outlook deepened the decline in a market that many traders now see as having little chance of rebounding.

"When these things go lower, they tend to go much farther than people anticipated," indicated Tariq Zahir at Tyche Capital. "I definitely think we're going to keep heading lower, everyone is trying to pick a bottom."

Brent for January fell by $2.95 to $66.09 a barrel by 1749 GMT, its lowest since October 2009.

US crude was down $2.66 at $63.18 a barrel, its lowest since July 2009.

Late on Friday, Morgan Stanley set a new bar for bearishness on Wall Street, slashing its average 2015 Brent base-case outlook by $28 to $70 per barrel and warning that prices could drop as low as $43 a barrel next year.

"Without OPEC intervention, markets risk becoming unbalanced, with peak oversupply likely in the second quarter of 2015," Morgan Stanley analyst Adam Longson said.

Thus far, there appears little sign of intervention, even after oil prices dropped 15 per cent, or nearly $12 a barrel, since OPEC opted not to cut production at its November 27 meeting.

Top exporter Saudi Arabia has resisted calls from poorer members to curb output and shore up prices which have slumped more than 40 per cent since June.

Libya's state oil company said on Sunday the country was producing 800,000 barrels a day, though its El Sharara oilfield was closed due to a pipeline blockade.

It is unclear how soon the price slump will slow the US shale boom. While the number of onshore rigs drilling for crude oil remains relatively high, companies are making deeper cuts to spending for next year.