Brent holds below $53 as oil falls to new five-and-a-half-year low

Brent crude held below $53 a barrel as monthly oil selling price cuts for European buyers from top OPEC producer Saudi Arabia heightened worries about oversupply.

"Saudi Arabia is showing no signs of pulling back," said Bjarne Schieldrop, chief commodity analyst with SEB in Oslo. "Stocks are continuing to build, and there is an increase in contango."

While Saudi Arabia increased its selling price to Asia, some analysts said the cuts to Europe reflect the kingdom's deepening defense of market share.

This added to bearish data over the weekend showing that Russia's 2014 oil output hit a post-Soviet-era high and exports from Iraq, OPEC's second-largest producer, reached their highest since 1980.

"It's hard to pinpoint a specific downward pressure," Schieldrop said.

Brent crude LCOc1 hit $52.04 a barrel on Tuesday, its lowest level since May 2009. It was trading at $52.41 at 4 a.m. ET, down 70 cents. U.S. crude CLc1 was at $49.44, down 60 cents, after falling to $49.15, its lowest since April 2009.

Jitters over political uncertainty in Greece added to an already faltering eurozone economy, raising questions about energy demand in Europe and compounding the bearish sentiment.

A slew of factors was keeping up the downward pressure on prices, according to Mark Keenan, who heads Asia commodities research at Societe Generale. He pointed to the concerns about Greece, high output from Russia, Iraq and the United States and a stronger dollar.

U.S. commercial crude oil and products stockpiles were forecast to have risen in the week ending Jan. 2, a preliminary Reuters survey showed on Monday, which could weigh further on prices.

A rise in the dollar index .DXY for a sixth straight month in December has made dollar-denominated oil more expensive for holders of other currencies, depressing prices.

Some economists expect cheaper oil to boost consumers' purchasing power and buoy the global economy, but the 50 percent plunge in oil prices since June has also raised deflationary fears.

"This is great news for motorists, but it presents a headache for policy makers, with the Fed keen to get their policy settings back to something more normal, and Europe keen to avoid a deflationary spiral," ANZ analysts said in a note.

A rebalancing of portfolios of major commodity indices that starts on Thursday may widen the spread between Brent and West Texas Intermediate, according to Societe Generale.

Up to $3 billion of Brent contracts will be bought versus $1.14 billion of WTI contracts, the bank estimated. Although the volumes are not significant, it could tilt sentiment toward a stronger Brent, Keenan said.