Oil fell towards $37 a barrel on Monday, trading within sight of an 11-year low, pressured by excess supply that has more than halved prices since the downturn began in mid-2014.
U.S. crude was trading at around parity with global benchmark Brent, having earlier in December risen to a premium for the first time in about a year following the lifting of a 40-year-old ban on most U.S. crude exports. <CL-LCO1=R>
Brent crude was down 71 cents at $37.18 a barrel at 1137 GMT. It fell to $35.98, an 11-year low, on Tuesday. U.S. crude was down 91 cents at $37.19. Trading volume was lighter than normal due to a UK public holiday.
“We expect both prices to rise next year,” said Eugen Weinberg, an analyst at Commerzbank. “A short-term slide can’t be excluded, due to persisting oversupplies, negative sentiment and stronger downside momentum.”
Figures from the Organization of the Petroleum Exporting Countries imply a glut of more than 2 million barrels per day, equal to over 2 percent of world demand. Oversupply is expected to persist into the earlier part of next year.
“The global supply and demand tables are still showing a heavy picture for the first half of 2016,” said Olivier Jakob, oil analyst at Petromatrix.
Signs on Monday that a further demand stimulus from low crude prices may be limited also added pressure.
In Japan, total oil product sales in November fell to a 46-year low. In Europe, demand growth for oil products turned negative in October, analysts at JBC Energy said in a report, citing figures from the Joint Organisations Data Initiative – the first year-on-year decline this year, JBC said.
The drop in prices gained impetus after OPEC, led by top exporter Saudi Arabia, a year ago dropped its longstanding policy of cutting output to support prices in favor of defending market share.
While the price collapse has partly achieved OPEC’s goals by curbing growth of competing supplies, it has put finances in producing nations under more strain, even in the relatively wealthy Gulf states.
Saudi Arabia is expected to announce its 2016 state budget on Monday, and the details will be scrutinized for any indication that it may give about the likelihood of the kingdom changing its oil policy.
A senior official of state oil company Aramco and three ministers will appear at a news conference scheduled for 1200 GMT on the budget.