Chinese slowdown further drag on oil

Signs of a slowdown in Chinese manufacturing hammered an already-bruised oil market, pushing Brent crude oil to its lowest point in five years.

The price for Brent crude oil for January delivery dropped below the $60 mark for the first time since May 2009 in early trading Tuesday, shedding more than $2 from the previous close to sell for $59 flat.

Crude oil prices are trading in a bear market, down more than 40 percent from their June values. Brent hovered near the $70 per barrel mark at the beginning of the month.

Recent declines followed reports from major oil groups that demand for oil next year would fall at the same time output from producers outside the Organization of Petroleum Exporting Countries, namely the United States, continues to increase.

Prices are at a point where some companies may struggle to make a profit if drilling programs continue under capital programs designed under oil at much higher prices. The U.S. Energy Information Administration last week said U.S. shale growth would slow, but production would still be at 40-year records.

Tuesday's price decline follows word that Chinese manufacturing was at a 7-month low in December, adding to worries about the resiliency of the Chinese economy.

Expanding China is taking on more energy than its peers, shifting demand dynamics toward the Asia-Pacific. Most growth in demand is expected from the Asia-Pacific and any slowdown in China could erase any remaining optimism about demand potential.

West Texas Intermediate, the U.S. oil price index, did somewhat better than Brent early Tuesday, but remained below the $60 mark to fetch $54.17 for the January contract.