Oil near six-year low; Brent, U.S. crude briefly reach parity

NEW YORK (Reuters) - Oil hit a near six-year low on Tuesday, with U.S. crude paring losses later on short-covering and reaching parity with Brent (brent.167)for the first time in three months, as traders continued to wonder when the six-month long price rout might end.

Oil prices are have already traded lower for seven consecutive weeks, and so far this week Brent is down 8 percent and U.S. crude down about 5 percent.

The arbitrage between U.S. crude and Brent crude oil futures traded at parity for the first time since October, with both markets at $46 a barrel at one point.

Traders said it was not immediately clear why the benchmarks converged, but analysts said it was a combination of oversupplied global markets coupled with short covering on the U.S. crude contract.

"The stock market rallied and that helped U.S. crude and the $44 a barrel level had been a target number for traders and U.S. crude held above that early on Tuesday," said Phil Flynn, analyst at Price Futures Group in Chicago.

U.S. crude had fallen to an April 2009 low of $44.20 earlier in the session before pulling back to trade down about 40 cents at $45.67 a barrel by 11:10 EST.

Brent crude was down $1.56 at $45.87 a barrel after a session low at $45.19.

Oil's plunge earlier in the session came after big producer United Arab Emirates defended OPEC's decision not to cut output.

(Additional reporting by Robert Gibbons; Editing by Dale Hudson, John Stonestreet and Chris Reese)

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