Oil edges lower to near three-month lows on surplus supply

“We have antiquated policies that were put in place in the 1970s that prohibit us from exporting our crude oil, yet we have allies around the globe asking the United States to provide them with a stable supply of energy”, said Republican Sen.

Light, sweet crude for January delivery fell 0.5% to $41.53 a barrel on the NY Mercantile Exchange.

Crude futures began trading higher before the data was released.

HONG KONG-Oil prices rose slightly in Asia trade Friday, with demand showing signs of picking up although ample supplies are likely to prevent any sharp price gains.

The dollar fell to a near one-week low against a basket of currencies .DXY , making crude and other commodities denominated in the greenback more affordable for holders of currencies, such as the euro EUR= .

A stronger dollar, bolstered by expectations of a raise in USA interest rates next month, is also helping push oil prices lower. It ended down 21 cents at $40.54 a barrel on Thursday.

“WTI once again came under pressure, dipping below key $40 before recovering slightly, as USA crude stockpiles continued to increase, keeping inventories over 100 million barrels above the five-year average”, said Bernard Aw, market strategist at IG Markets in Singapore.

The glut has seen Iraqi crude grades selling as low as $30 a barrel, while official selling prices from Nigeria have fallen to their lowest in more than a decade.

Market participants are expecting the latest oil rig count out of the USA later Friday. Oil prices have been locked in a tight range below $50 a barrel in recent months as investors weigh the damage low prices have inflicted on the industry against the continuing high level of oil stocks around the world.

A growing discount between the front month and forward contracts CLZ5-Z6 , which was trading near a record wide $8 per barrel, has sparked talk of traders storing more crude in the hope of delivering later at higher prices.

The analysts surveyed by Platts – the energy information arm of McGraw-Hill Financial Inc. – had expected crude stocks to go up by much bigger 1.1 million barrels. The December contracts expired Tuesday, so traders would be closing out positions ahead of the expiry date.

Goldman Sachs said there remained a downside risk to oil prices “as storage utilization continues to climb”.