By Claire Milhench
LONDON (Reuters) - Brent crude fell by more than $1 towards $78 a barrel on Monday after Japan, the world's fourth-biggest crude importer, slipped into recession and as Saudi Arabia reiterated the oil price should be left to supply and demand.
The market is waiting to see whether the Organization of Petroleum Exporting Countries will cut production at its meeting at the end of November. The Atlantic Basin is still awash with unsold barrels partly due to the continued growth in U.S. shale oil production, whilst demand growth remains weak.
Brent crude was down 90 cents to $78.51 a barrel at 1331 GMT, after dipping as low as $77.94 a barrel earlier in the session. The contract for January delivery closed $1.92 higher on Friday.
U.S. crude for December delivery was 72 cents lower at $75.10 a barrel, after settling $1.61 higher on Friday.
"We are fast and furiously giving away most of the gains we had on Friday," said Ole Hansen, senior commodity strategist at Saxo Bank. "This is a market where traders are looking for selling opportunities."
The market bounced on Friday after Brent hit a four-year low of $76.76 a barrel, triggering a renewed focus on OPEC's ability to reach an agreement to cut production.
"The market could be out to test the resolve of OPEC," said Hansen. "There is a lot of money currently to be made on being short, and those positions are being defended until fundamentals tell them otherwise."
The prospects of a pick-up in global oil demand were dealt a blow by data showing Japan's economy unexpectedly shrank by an annualised 1.6 percent in the third quarter because of weak consumption and exports.
Japan is now in a recession, raising fresh concerns about global growth and prompting a sell-off in stock markets in Asia and Europe.
"This is another knock on crude oil prices, another bearish factor," said Tony Nunan, oil risk manager at Tokyo's Mitsubishi Corp. "The downtrend is still alive until we get something that turns us around. That could be the OPEC meeting."
Iran's oil minister accused some OPEC countries of making up excuses to justify their refusal to stabilise prices by cutting output. This was possibly a reference to Saudi Arabia after a Saudi official on Sunday insisted the issue should be left to market forces.
On Monday, the Saudi finance minister said the plunge in oil prices would have no direct impact on next year's budget or government spending.
(Additional reporting by Jacob Gronholt-Pedersen in Singapore; Editing by Michael Urquhart)
