Oil hits 5-1/2-year low under $57 on supply glut

London: Brent crude oil fell to a 5-1/2-year low below $57 a barrel on Tuesday as a global supply glut outweighed concerns of lost supply from Libya where battling militias have closed ports. Brent fell $1.14 a barrel to a low of $56.74, its lowest since May 2009, before recovering slightly to trade around $56.95 by 0905 GMT.

U.S. crude fell 75 cents to $52.86 after hitting $52.70 - also its lowest since May 2009. It fell $1.12 on Monday. Supply disruptions in Libya mean the OPEC producer is exporting almost no crude.

Still, oil markets have been oversupplied in recent months due to increasing output of high quality, light oil from U.S. shale and lower-than-expected consumption as a result of faltering global economic growth and competition from alternative fuels. The Organization of the Petroleum Exporting Countries, which pumps a third of the world's oil, had been expected to trim output to stabilise prices, but it decided in November to keep production unchanged and let the market find its own level.

"There's no sign of any reduction of output by OPEC," said Ken Hasegawa, commodity sales manager at Tokyo's Newedge Japan. He said Brent could drop to $55 a barrel and U.S. crude to $50 a barrel early next year. Traders are now eyeing weekly U.S. inventory data.

An industry group, the American Petroleum Institute, is scheduled to release its report on Tuesday, while the U.S. Department of Energy's Energy Information Administration will release data on Wednesday.

"A potential surprise draw in U.S. oil stocks would give a short-term fillip to the upside," said Michael McCarthy, chief market strategist at CMC Markets.