NEW YORK (Reuters) - Brent crude touched an 11-year low on Tuesday, rebounding slightly after settlement, as a bearish outlook for 2016 and weaker profits for refining oil products kept a lid on gains.
Brent crude LCOc1 for February delivery settled at $36.11 a barrel, after earlier dipping to $35.98, below an eleven-year low.
U.S. West Texas Intermediate (WTI) crude futures CLc1 flipped to a premium to Brent, settling at $36.14 a barrel, up 33 cents, or 0.92 percent.
Both benchmarks saw a boost late in the day after the American Petroleum Institute, an industry trade group, released data showing an unexpected drop in stockpiles. U.S. crude rose to $36.46, while Brent climbed to $36.38.
The API suggested inventories fell 3.6 million barrels in the week ended Dec. 18, compared with an expected 1.1-million-barrel increase.
Brent’s weakness as WTI strengthened slightly brought the two benchmarks into parity for the first time since January of this year.
“With the (U.S.) export ban being lifted, we’ve seen that spread collapse, and it’s going to continue in that direction as demand becomes greater for WTI globally,” said Matthew Perry, partner at Kronenberg Capital Advisors. “We expect that spread to stay very narrow, and there will be times when WTI will be at a premium.”
Traders squared positions ahead of a traditional period of low liquidity between Christmas and New Year’s Day as they covered short positions, bolstering U.S. crude.
“It’s somewhat of a defensive posture and a reasonable posture before the beginning of the year,” said John Saucer, vice president at Mobius Risk Group in Houston.
Meanwhile, Saudi Arabia, the world’s largest oil exporter, said it had shot down a ballistic missile that was heading toward the city of Jizan, where a new refinery and oil terminal are under construction. Saudi Aramco said all its facilities in the area were “in safe and normal operation.”
Concerns about global crude supplies continuing to outstrip demand next year limited price gains.
“We view the oversupply as continuing well into next year before rebalancing in the fourth quarter 2016,” Goldman Sachs said in a report circulated on Tuesday.
“Our base case remains that the global oil stock build will on aggregate remain shy of storage capacity, although the storage buffer has once again narrowed.”
Goldman analysts said a higher-than-expected 1.5 million barrel a day global market imbalance in this quarter is likely to extend into the first half of 2016 because of milder-than-usual weather weighing on demand.
The weather provided a further bearish element as an unusually mild start to the winter in the northern hemisphere weakens demand for heating oil.
Additional reporting by Henning Gloystein in Singapore; Editing by Bernadette Baum, Chris Reese and Leslie Adler