Oil slips below $86 on global oversupply

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Brent crude slipped below $86 a barrel on Monday, resuming a downward move that took the global oil benchmark to near a four-year low last week as supply overwhelmed weak demand in several key markets.

Abundant global oil supplies, particularly of high quality, light oil, coupled with a gloomy economic outlook from Europe to China pushed Brent last week below $83, its lowest since 2010.

Oil prices are down more than 25 percent since June.

Energy economists have slashed their forecasts of world oil demand growth for next year as the global economic outlook weakens.

And it is not clear if the Organization of the Petroleum Exporting Countries will decide to cut output to support prices when they meet for a biannual gathering on Nov. 27.

Saudi Arabia, Kuwait and Iran have all indicated reluctance to change supply policy.

Brent was down $1.45 at $85 after rallying 2 percent on Friday, its biggest gain in over a month.

U.S. crude fell 90 cents to $82 a barrel.

Falling oil fantastic news: Petrowski
Falling oil fantastic news: Petrowski   

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A positive U.S. consumer sentiment index brought cheer to Asia's equity markets on Monday, although the impact on oil may be short-lived.

"Oil markets are following the positive sentiment from equity markets," said Ric Spooner, chief analyst at CMC Markets in Sydney.

"But it is a short-term reaction and the upside is limited as, barring any geopolitical risks, nothing much has changed in terms of fundamentals."

The International Energy Agency cut its demand growth forecast for oil in 2015 as the global economic outlook remains weak, indicating lower oil demand.

Read MoreOil demand to 'rise tentatively' in 2015: IEA

Investors' hopes that OPEC producers would cut output to support prices amid an unrelenting shale oil boom in North America have been dashed by comments and signals from Saudi Arabia, Kuwait and Iran.

However, production has been halted temporarily at the Saudi-Kuwait Khafji oilfield, which has a production of 280,000-300,000 barrels per day (bpd), just over 2 percent of Saudi Arabia's total output capacity.

"I don't think it will have a huge impact by changing any overall supply-demand balance, which is still a weak outlook," Spooner said.

"But it does get people talking about Saudi and Kuwait - about not being unhappy to take some barrels off."

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Still, investors are keeping an eye on any disruption to oil supply from geopolitical developments.

"The market is at a level where it is vulnerable to anything that is of a real threat to production," Spooner said.

Elsewhere in the Middle East, tension mounted as Islamic State's fight against Kurdish defenders further destabilized the Syrian border town of Kobani.

Traders are also concerned about the uncertainty over who is in charge of Libya's vast oil reserves, after a self-styled government controlling Tripoli announced its oil policies.

Libya is currently producing 800,000 bpd of oil, down more than 40 percent from its peak of 1.4 million bpd in mid-2013.