NEW YORK - Oil prices fell on Wednesday to a 5-1/2-year low and ended with their second-biggest annual decline ever, down by half since June under pressure from a global glut of crude.
Just before the close, Brent and US oil futures bounced off session lows. But prices still settled at their lowest since May 2009. Weekly US data showed crude oil stockpiles fell more than expected, but inventories at the oil hub at Cushing, Oklahoma, grew, keeping prices depressed.
Oil prices have collapsed this year as the Organisation of the Petroleum Exporting Countries opted to maintain the same level of output despite a global glut caused by expanding US shale output and diminished demand growth from China.
Phil Flynn, an analyst at Price Futures Group, said the mood was "sour" and trade choppy as dealers continued to hunt for a bottom, with volatility exacerbated by thin holiday volume.
"We are sowing the seeds for a rally down the road, but it doesn't look like any time soon," he said.
Brent settled down 57 cents at $57.33 a barrel, bouncing off an intra-day low of $55.81 but closing below $60 for a fourth straight day.
US crude fell 85 cents to settle at $53.27 a barrel, down 45 per cent from a year ago.
Trading seesawed as traders balanced positions for the new year and digested a mixed report on US crude stockpiles from the Energy Information Administration [EIA].
US crude closed with its second-largest annual decline on record. The biggest came in 2008, when prices collapsed in the wake of the financial crisis. The last round of OPEC output cuts eventually brought them off lows near $30 a barrel.
In contrast, OPEC at a Nov. 27 meeting this year decided against cutting output. Despite its own forecasts of a growing surplus, the group opted to defend its market share against shale oil and other rival supply sources.
Turmoil in Libya dented OPEC supply in December to a six-month low, a Reuters survey showed, although forecasts still point to a glut.
The EIA reported a weekly drawdown US crude inventory, along with small increases in demand for gasoline and heating oil and a rise in stocks for gasoline and distillate.
Oil prices came under further pressure from a survey showing China's factory sector shrank in December for the first time in seven months. This should hurt energy demand in the world's No. 2 consumer.