Oil holds near multi-year lows
At 1300 GMT in London, Brent North Sea crude for delivery in February was up 12 cents at $36.74 a barrel.
US benchmark West Texas Intermediate (WTI) gained 11 cents to $36.92 compared with Monday’s close.
The market struggled Tuesday, one day after major crude exporter and OPEC kingpin Saudi Arabia cut subsidies on fuel, power and water to counter the impact of plunging oil prices on its finances.
Riyadh posted a deficit of $98 billion (89 billion euros) in 2015 after a sharp decline in oil revenues.
And with crude prices expected to remain low, Saudi authorities also projected a shortfall of $87 billion in the 2016 budget, the third year in a row with a shortfall.
“The Saudi budget … reinforced the ‘lower for longer’ sentiment in that market,” said analyst Augustin Eden at traders Accendo Markets, in reference to OPEC’s Saudi-backed policy of pushing oil prices lower to hurt non-OPEC producers.
The swift action to cut subsidies was unexpected, even if there had been no doubt Saudi Arabia would post a deficit this year as oil prices have dropped below $40 a barrel since mid-2014.
Oil had collapsed early last week, with Brent striking an 11-year low on December 22 on the back of a stubborn global supply glut that has plagued the market all year.
Prices then attempted to rally but tanked Monday on downbeat Chinese and Japanese data, alongside a Saudi budget plan that suggested the petroleum-exporting giant was planning for oil prices to stay low.
“Oil prices … have stabilised and that’s stopped the rot for now, but the headlines are all about the Saudi fiscal response to the sustained weak price,” added Societe Generale analyst Kit Juckes.
Trading volumes were meanwhile thin with many investors absent for an extended holiday break.
In November 2014, OPEC embarked upon a new strategy to maintain its collective oil output despite abundant supplies of crude that have ravaged revenues.
And earlier this month, OPEC refused again to slash record high output at their latest gathering.
The plan is aimed at pushing oil prices lower in order to squeeze less-competitive players, including US shale producers, out of the market.
Saudi Arabia is the biggest oil producer in the Organisation of the Petroleum Exporting Countries, whose 13 member nations pump about 40 percent of the world’s crude.
Daniel Ang, an investment analyst with Phillip Futures in Singapore, said the price weakness could also have been sparked by data showing Japanese industrial production fell 1.0 percent in November from a month earlier.
The figures came after separate data last week showed persistently weak inflation and household spending.
Early last week, on December 21, WTI oil slumped to $33.98 — the lowest price since mid February 2009. One day later, Brent crude tumbled to $35.98 — the weakest point since early July 2004.
OPEC countries are currently producing about 32 million barrels per day, the highest in three and a half years and beyond the cartel’s 30 million ceiling target.