Oil pulls back from low ahead of United States inventory numbers

The U.S. benchmark crude ended last Friday at a new minimum for the year, and on Monday dropped even lower to $33.98 per barrel.

Brent North Sea crude for delivery in February finished down 51 cents at US$36.35 a barrel, its lowest closing price in 11 years.

Oil prices edged away from multi-year lows on Tuesday as the northern hemisphere moves into the peak-demand winter season, but mild weather and ballooning supplies mean that prices are expected to remain generally low well into 2016.

“Maybe some believe you’re going to see a Santa Clause rally but that window is closing bad fast”, said Robert Pavlik, chief market strategist at Boston Private Wealth in NY.

As a result, analysts expect the Brent spot premium over United States crude to flip into a discount soon, something that has already happened with contracts for March 2016 delivery. Crude is set to climb from current “very low” levels that are hurting producers, Iraqi Oil Minister Adel Abdul Mahdi said, without predicting when prices may rebound. “Non-OPEC production growth slowed nearly to a standstill, and should decline next year”.

Both benchmarks have lost at least 35 per cent since the beginning of the year.

There’s no need to be pessimistic about oil prices, Qatar’s Mr Al Sada said at the meeting of the Organisation of Arab Petroleum Exporting Countries, which includes seven OPEC members. “However, floating storage may not be utilized to the same extent as 2008-2009, when more than 100 million barrels of oil was stored in tankers”.

BNP Paribas said the number of USA and European heating days had been 30 per cent and 39 per cent below the 10-year average since December 7 respectively and that the number of days on which heating is required were expected to be 23-24 per cent lower than normal until January 4.

The spread between Brent and NY futures has shrunk to the narrowest in 11 months amid speculation that the USA plan to allow domestic oil to be shipped overseas may ease the nation’s oversupply.

Meanwhile, the spread between the Brent and the WTI crude contracts stood at 66 cents, compared to 82 cents by close of trade on Friday. If the export ban is removed, U.S. producers can export to global markets.