Brent rebounds above $71 in turbulent oil market

Brent rose to $71 a barrel yesterday, recovering some of its losses from the previous session as a turbulent market searched for a price floor after a nearly 40 percent fall since June. Oil has seen choppy trade since the Organisation of the Petroleum Exporting Countries (OPEC) said last week it would not lower output despite an oversupplied market.

Brent hit a five-year low below $68 a barrel on Monday after averaging around

$110 a barrel for the last three years. “The market’s volatility is a result of people working out what’s going to happen next,” said Jonathan Barratt, chief investment officer at Ayers Alliance Securities. “Prices should find a volatile low at these levels,” he added, arguing oil producers hurt by a drop in revenues may still trim output despite OPEC’s formal decision.

Brent for delivery in January rose 62 cents to $71.16 a barrel after falling $2 on Tuesday. It was slightly off a day high of $71.46. U.S. crude for January delivery was at $67.54 a barrel, off the day’s high of $67.97, but up 66 cents from the previous session when prices dropped more than $2.

OPEC’s oil supply fell by 340,000 barrels per day (bpd) in November as a recovery in Libya faltered, although a lack of deliberate cutbacks by Saudi Arabia and other key members underlines their focus on defending market share.

Chart analysts, however, warned that the months-longrout may not be over and U.S. crude could plunge toward $50 per barrel if a handful of tenuous support levels give way after a period of consolidation. American Petroleum Institute data showing a bigger-than-expected fall in crude stocks in the United States last week provided some support U.S. crude.

The API said crude inventories fell by 6.5 million barrels in the week to Nov. 28 to 373 million, according to API, versus analyst expectations for an increase of 1.3 million barrels. Stocks at the U.S. crude contract’s delivery hub of Cushing, Oklahoma, fell 610,000 barrels.

Meanwhile Saudi Arabia would only consider cutting production if other countries, including non-OPEC producer Russia, joined in limits, former Saudi intelligence chief Prince Turki bin Faisal has disclosed.

“The Kingdom is not going to give up market share at this time for anybody and allow producers whether in Russia, Nigeria, Iran and other places to sell to Saudi customers because we cut our production,” Prince Turki said during a visit to London.

“If there is a reasonably guaranteed oversight of production quotas – if they ever are agreed with and someone can definitively say there will never be under-the-table selling of the oil from these other countries – maybe then I think Saudi Arabia and other oil producers would be willing to cut down production,” he said.

“But we have tried that in the past and unfortunately other producers took advantage,” the prince added. Oil has fallen since June to reach its lowest since October 2009 on Monday as new supplies of high-quality, light crude from North America overwhelmed demand, which in turn has suffered from slower economic growth in China and Europe.

The Organisation of the Petroleum Exporting Countries had been expected to trim output last week to try to rebalance the market but agreed to maintain existing production targets. Prince Turki said the Kingdom had accumulated sufficient financial reserves over recent years to finance requirements even if oil prices fell.

“I see no immediate crisis for Saudi Arabia in the coming couple of years or so,” he said.

Vanguard