Oil prices fell Tuesday as traders resumed the selloff that started after OPEC's decision not to take drastic action to support prices.
The U.S. oil contract lost $1.01, or 1.5%, to $67.95 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, dropped 65 cents, or 0.9%, to $71.89 a barrel on ICE Futures Europe.
The decline limits Monday's bounce in oil prices to one day, suggesting the market has not found its floor, analysts said. The 12-member Organization of the Petroleum Exporting Countries agreed last week to keep their existing production ceiling at 30 million barrels a day, sparking expectations that oil prices could extend sharp losses. Prices have dropped about 35% since June.
Commerzbank analysts referred to Monday's bounce as a "radical turnaround," but attributed the 3% to 4% gains to a technical countermove. Traders who bet that prices would fall had likely bought back in just to lock in the profits from those bets, analysts said.
On Tuesday, the selling started again.
Production capability is so high that oil supplies are likely to grow even as prices drop, said Jim Ritterbusch, president of energy-advisory firm Ritterbusch & Associates, in a note. U.S. prices could fall below $60 a barrel at some point, but it won't be an even decline, he added.
"Two-sided price volatility is apt to develop following a major price plunge," Mr. Ritterbusch said. "It will still take some time for the market to sort out the ramifications of the OPEC announcement."
Banks have begun lowering their price projections. Société Générale SA said late Monday that it cut its estimates by more than 20%, expecting Brent to average $70 a barrel and the U.S. contract to average $65 through 2015 and 2016. Credit Suisse Group AG said U.S. oil prices would average just $62 a barrel in the first quarter of 2015.
"Oil prices have now gone past their tipping point," Credit Suisse analysts Jan Stuart and Johannes Van Der Tuin wrote in a note to clients.
The Commerzbank analysts said that low prices may be affecting investment decisions among producers, as the number of new shale oil rigs approved in the U.S. declined by 15% in October. Shale oil and gas fields in the U.S. have lifted global production in recent years, but some analysts have said not all projects may be viable at current oil prices.
Research firm Energy Aspects says that there will be an oversupply of crude oil in the first half of next year, and that there will only be a limited reaction from suppliers, which means inventories are likely to rise. That will prevent any significant rebound in prices, it said.
"Even once the initial selling frenzy is over, the upward momentum will be capped due to rising inventories...Prices are likely to settle in a new range of $70-$80 per barrel" in the first half of next year, Energy Aspects said.
January reformulated gasoline blendstock, or RBOB, fell 2.53 cents, or 1.3%, to $1.8594 a gallon.
January diesel fell 2.11 cents, or 1%, to $2.1913 a gallon.
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(END) Dow Jones Newswires