Brent at four-year low in continued hunt for bottom

By Barani Krishnan

NEW YORK (Reuters) - Benchmark Brent crude closed down on Tuesday after setting a four-year low and coming close to testing the psychologically important $80 a barrel support, as traders continued to seek a bottom to a selloff that began in June.

U.S. crude ended up, despite expectations that oil inventories in the United States rose last week. The gap between Brent and U.S. West Texas Intermediate (WTI) crude was at its smallest in three weeks as the markets diverged.

Brent closed down 67 cents, or 0.8 percent, at $81.67 a barrel, after touching a Sept. 2010 low of $80.46. It is down 25 percent from a June high above $107.

WTI settled up 54 cents, or 0.7 percent, at $77.94 a barrel, after a session low at $76.42.

That spread between the two was less than $4 a barrel, the smallest since Oct. 22.

Some analysts said Brent fared worse on Tuesday on growing expectations that global producer group OPEC will not cut output at its Nov. 27 meeting.

"The theme remains the same ... We have no meaningful way to cut production and the multi-year lows in prices that we're hitting are feeding the hunt for even lower bottoms," said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut.

While U.S. oil supplies were also thought to be excessive, a higher refinery utilization in the United States could kick in coming weeks, changing the demand equation for WTI.

"Some people are also pricing in forecasts for U.S. colder weather in the coming weeks, which generally boosts energy usage in the United States," said Phil Flynn, analyst at Price Futures Group in Chicago.

Industry group American Petroleum Institute (API) is expected to report on Wednesday that U.S. commercial crude stocks rose last week while inventories of distillates fell and gasoline supplies remained steady, a Reuters poll showed.

The U.S. Department of Energy's statistical arm the Energy Information Administration (EIA) will release its inventory report on Thursday.

Both reports were delayed by a day due to Tuesday's Veterans Day holiday.

Fear of supply disruptions in Libya, where a rival government seized the country's capital and took control of its most productive oilfield, El Sharara, helped limit the downside in oil earlier in the session, traders said.

(Additional reporting by Sam Wilkin in London; and Jacob Gronholt-Pedersen in Singapore; Editing by Marguerita Choy, Chris Reese and Cynthia Osterman)