U.S. oil plunges more than 2 percent on supply glut woes

By Meeyoung Cho SEOUL (Reuters) - Crude futures lost ground in early Asian trading on Monday, with U.S. oil plunging more than 2 percent, pressured by a global supply surplus despite a cut in the number of U.S. rigs for an eleventh week out of 12. U.S. crude's West Texas Intermediate (WTI) January contract (CLc1) had dropped 91 cents, or 2.17 percent, to $40.99 a barrel by 0215 GMT. That was near levels seen on Friday before the U.S. crude December contract expired. Benchmark front-month Brent futures for January (LCOc1) fell 60 cents, or 1.34 percent, to $44.06 a barrel, after ending up 48 cents at $44.66 a barrel on Friday. "The burden of carrying high U.S. crude oil inventories is large," Kang Yoo-jin, commodities analyst at NH Investment and Securities in Seoul, said in a note on Monday. "The markets would likely rebound only if they saw a fall in U.S. crude inventories, while declining U.S. crude output and seasonal demand provide some support to oil at low prices." Venezuela's oil minister said on Sunday that OPEC cannot allow an oil price war and must take action to stabilize the crude market soon. When asked how low oil prices could go in 2016 if OPEC doesn't change its policy, he said: "Mid-20s." BMI Research, part of the Fitch ratings agency, said: "What is underway now is a structural market rebalancing in which low oil prices clear out high cost production - a relatively small part of which is U.S. shale. It is not the result of OPEC policy, but of the basics of supply and demand." U.S. crude was briefly supported on Friday as U.S. drillers removed 10 oil rigs in the week ended Nov. 20, the biggest weekly decline since late October, bringing the total rig count down to 564, oil services company Baker Hughes Inc (N:BHI) said in its closely followed report. U.S. crude's December futures which expired on Friday ended 15 cents down at $40.39 after hitting a low of $38.99, the cheapest since Aug. 27. Markets were keeping an eye on developing geopolitical tensions in the oil-producing Middle East as Jordan's King Abdullah, a U.S. ally, will hold talks in Moscow on Tuesday with Russian President Vladimir Putin on how to tackle "terror groups" led by Islamic State in Syria, an official source said. Meanwhile, Algeria's energy earnings are forecast to fall to $26.4 billion next year after low oil prices cut into the OPEC nation's economy, Finance Minister Abderrahmane Benkhalfa said on Sunday.