Oil falls below $ 72 after sharp rally in volatile market

• Oil falls more than $1 after Monday gains
• Traders expect market to remain volatile

LONDON (Reuters): Brent oil fell below $ 72 a barrel on Tuesday, giving up some of its gains in Monday’s sharp rally from five-year lows, as traders were uncertain over whether the market had reached a floor or would continue to fall. “I am not surprised the price is going down. The market is looking for a renewed sense of direction and trying to figure out if we have hit the bottom or if we are about to go lower again,” said Michael Hewson, an analyst at CMC Markets in London. “I think there is a lot of ebb and flow, and at the moment there is a battle going on between the bulls and the bears in light of the really strong rally we saw yesterday.” Brent was down 90 cents at $ 71.64 by 1120 GMT, after jumping 3.4 percent on Monday. US crude was down $ 1.05 at $ 67.95 a barrel. Oil has fallen since June to reach its lowest since October 2009 on Monday as new supplies of high quality, light oil from North America have overwhelmed demand. The Organization of the Petroleum Exporting Countries had been expected to trim output at a meeting last week to try to rebalance the market but agreed to maintain existing production targets. Analysts said the market was going through a volatile adjustment phase that would lead to erratic price movements until a more stable pricing environment is found. “Saudi Arabia and OPEC no longer have the mechanism to balance markets from the supply side,” said Mark Keenan, head of commodities research Asia at Societe Generale. The bank cut its US crude and Brent forecasts to an average of $ 65 and $ 70, respectively, for both 2015 and 2016. The two benchmarks touched five-year lows on Monday, with Brent dipping to $ 67.53 a barrel and WTI touching $ 63.72, before recovering to settle up on the day. Analysts say much lower oil prices may force some producers out of the market. As crude prices tumble, offshore drillers are increasingly considering “warm stacking” their rigs to take them temporarily off the market. The low prices also threaten unconventional producers that have come to the market when prices were still higher. New data suggested that a much anticipated slowdown in the US shale rig count had started to take place.