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

Mon Dec 8, 2014 8:11pm EST
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By Jessica Resnick-Ault

NEW YORK (Reuters) - Oil dived 4 percent to new five-year lows on Monday, as Wall Street expectations of a deeper price slump next year and a Kuwaiti prediction for $65 crude set off one of the biggest declines this year.

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 are content to ride out the rout.

The pessimistic outlook deepened the decline in a market that many traders see as a one-way bet for the time being.

“When these things go lower, they tend to go much farther than people anticipated,” said 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 LCOc1 fell $2.88, more than 4 percent, to settle at $66.19 a barrel, the third-largest one-day percentage drop this year and its lowest settlement price since October 2009.

U.S. crude CLc1 fell 4.2 percent or $2.79 to end at $63.05 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.   Continued...

A man changes the price for a gallon of gasoline at a gas station in Medford, Massachusetts December 4, 2014. REUTERS/Brian Snyder