Crude oil prices drop more than 1 percent

U.S. inventories are now some 125 million barrels higher than the five-year average and could hit a new record high during the first quarter when inventories tendo rise.

Brent for February settlement was 10 cents higher at $36.56 a barrel on the London-based ICE Futures Europe exchange.

Prices fell 3 percent on Wednesday as crude inventories in the United States rose 2.6 million barrels last week, the US Energy Information Administration said, echoing high stocks in Europe and Asia.

Also weighing on market sentiment was China as growth slowed in the economy of the world’s largest energy consumer.

USA crude has been firmer relative to Brent recently, on signs that the US oil market is likely to grow tighter following Congress’ decision to lift a 40-year old ban on domestic oil exports, while a global glut gets worse in 2016 due to soaring production in Saudi Arabia and Russian Federation. Prices have decreased 12 percent in December and are poised for a second monthly loss.

Since the mid 2014, the crude prices kept plunging by two-thirds as increased output from the OPEC member countries, Russian Federation and the U. Winter storms in southern US states could throttle inventory levels and output, however, as regional because of icy road conditions in Texas, the No. 1 oil producer in the nation, and Oklahoma, home to the Cushing oil storage hub.

The Organization of the Petroleum Exporting Countries, OPEC, effectively rejected calls to reduce its crude production in a bid to boost prices at a meeting earlier this month.

European benchmark Brent crude for February was down 33 cents at $36.55.

Trading volumes are expected to remain light today. USA crude imports averaged 7.9 million barrels per day last week, up by 566,000 barrels per day from the previous week.

Oil exports from southern Iraq, at 3.27 million barrels per day so far in December, held near a record, cementing its role as the fastest source of supply growth in 2015.

Morgan Stanley said in its outlook for next year that “headwinds (are) growing for 2016 oil”, adding that: “The hope for a rebalancing in 2016 continues to suffer serious setbacks”.

Oil prices fell as much as 35 percent for the year after a race to pump by Middle East crude producers and USA shale oil drillers created an unprecedented global glut that may take through 2016 to clear.

The cartel – whose biggest player is Saudi Arabia – is now producing an estimated 32 million barrels per day, above the group’s 30-million-barrel target.