Oil jumps 3 pct after hitting 5-year low; focus on U.S. shale

By Barani Krishnan

NEW YORK (Reuters) - Crude markets jumped about 3 percent on Monday, rebounding from five-year lows and heading for their biggest daily gain since at least June after fear that the high U.S. shale output blamed for the oil glut may be shrinking.

A weaker dollar, which makes commodities denominated in the greenback more affordable to holders of other currencies, also enticed buying in oil and other natural resource markets, traders said. [FRX/]

Benchmark Brent crude oil rose $1.90 to $72.05 a barrel, after earlier reaching $72.43. The 3 percent gain was Brent's most since June. It had fallen as much $2.62 earlier to $67.53, a low since July 2009.

U.S. crude was up $2.34 at $68.49, after a five-year bottom hit at $63.72. For U.S. crude, it was the largest move since May 2013.

"The market clearly got a little overdone to the downside and now it's coming back up, proof that there will be a response from the shale patch to these low prices," said John Kilduff, partner at energy hedge fund Again Capital in New York. "Several shale companies are already reporting capital expenditure reductions next year as their profit margins get thinned out."

On Wall Street, shares of shale energy companies such as Denbury Resources and Newfield Exploration took a beating for a second straight session, falling more than 7 percent each.

Data reviewed by Reuters on Monday showed the new low-price environment for oil might have started affecting U.S. shale production, with a 15 percent drop in permits issued for new shale wells in October.

"The market is still looking for a new equilibrium below $70, which is a little surprising given that with the current prices, much of the shale oil production in the U.S., or part of it, will be unprofitable," Commerzbank analyst Eugen Weinberg said.

Brent and U.S. crude have fallen five months in a row, for the longest losing streak in oil since the 2008 financial crisis. Despite Monday's rebound, prices are still down 10 percent from the start of last week, before producer group OPEC decided on Thursday not to cut output despite oversupply worries.

Saudi Arabia, the most influential member of the Organization of the Petroleum Exporting Countries, blocked moves by some smaller producers to curb output, arguing that low prices would ultimately hurt U.S. shale oil.

(Additional reporting by Ron Bousso and Ahmed Aboulene in London and Florence Tan in Singapore; Editing by Jessica Resnick-Ault, Meredith Mazzilli, David Goodman, William Hardy, David Clarke and Chris Reese)