Oil edges above $37, but remains near 11-year low

Oil tankers dock at a floating platform on Wednesday, offshore from the southern Iraqi port city of Al Faw, 90 kilometres south of Basra. - AFP

Oil edged further above $37 a barrel on Thursday but remained within sight of an 11-year low reached this week, as signs of a tighter US market raised hopes a supply glut will ease.
US crude has gained support from falling inventories, reduced drilling and the lifting of a ban on most US crude exports, which has pushed US crude to a premium to global benchmark Brent for the first time in about a year.
Brent was up 13 cents at $37.49 a barrel as of 1307GMT. It fell to $35.98, an 11-year low, on Tuesday. US crude was up 20 cents at $37.70 after gaining more than 8 per cent this week.
"The lifting of the ban on US exports will provide some underlying support for US crude. Oil demand in 2015 was exceptionally high and at current prices, demand is going to remain strong next year," said Olivier Jakob, analyst at Petromatrix. "For now, there is still an ample supply of crude and a huge amount in storage."
Brent traders in London said the market was quiet with many particpants away for the Christmas holidays. Crude gained support from the latest snapshot of US supplies on Wednesday. Crude inventories, which were expected to rise, fell 5.88 million barrels, the Energy Information Administration said.
Baker Hughes reported that US oil drillers cut rigs for a fifth week in the last six, a sign that low prices are curbing activity and could slow output. Brent has more than halved from over $100 a barrel 18 months ago, pressured by a supply glut that according to the Organisation of the Petroleum Exporting Countries (Opec) figures is currently over two million barrels per day.
Next year, the glut is expected to be smaller as world demand rises and the price collapse leads to lower output from some countries outside Opec, but there is no sign yet that Opec itself is prepared to lower its supply - which is likely to rise when sanctions on Iran are lifted. "While the crude rebalancing should start next year, the pace of inventory drawdown will depend on Opec output," said analysts at Energy Aspects in a report.
"Despite Iran's return, we believe the Opec countries will struggle to maintain output, resulting in stronger prices and timespreads in the second half of 2016."