Oil reverses early gains, trades near $57 as supply glut prevails

Brent crude LCOc1 reversed early gains to trade near $57 a barrel on Friday, as the glut of oil that has halved prices since June overshadowed investors repositioning at the start of the year for an eventual recovery. Brent has fallen to its lowest since 2009 as top exporter Saudi Arabia and other large Gulf producers have declined to cut production in the face of fast-growing U.S. shale oil output, despite pleas from other members in the Organization of the Petroleum Exporting Countries (OPEC).

"Nothing has changed on the supply side. Unless there are some supply cuts, oil markets can't be strong at the moment," said Ken Hasegawa, commodity sales manager at Tokyo's Newedge Japan.

Brent crude LCOc1 for February delivery was up 8 cents at $57.41 at 0950 GMT (0450 ET), more than $1 below the day's high at $58.54, which was hit within 30 minutes of the open of trading. Prices touched a post-2009 low of $55.81 on Wednesday. Traders said a number of buy orders would have been placed ahead of the start of the new year's trading, with some willing to bet prices will bounce this year as expensive oil projects are potentially shuttered or canceled. Front-month U.S. crude CLc1 for February delivery was up 28 cents a barrel from Wednesday's close at $53.55, after reaching an intraday high of $55.11 shortly after the start of trading.

Markets were shut on Thursday for the New Year holiday. Prices faced pressure on Friday after a senior Libyan oil official said a major fire in an oil storage tank at the North African country's largest crude export port had been extinguished. Iraq, the secondlargest producer in OPEC, said exports had averaged the highest since 1980 in December, reaching 2.94 million barrels per day. Iran's deputy foreign minister on Thursday called on its regional rival Saudi Arabia to take action to support oil prices, saying producer countries across the Middle East will be hurt unless the slump is reversed. The jump in oil prices early on Friday was also capped by surveys showing weak factory activity in China in December, which underlined the challenges facing the country's manufacturers as they fight rising costs and softening demand in the world's second-largest economy.