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Oil drops before US inventories data

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Britain's oil and gas output rose in 2015 for the first time since the turn of the millennium, industry body Oil & Gas UK said on Monday, reversing a declining trend but coming as oil prices are trading at a seven-year low.

[LONDON] Oil prices resumed their decline on Wednesday ahead of the release of data on US commercial crude stockpiles and production.

The market has been highly volatile during the holiday-shortened final week of 2015 and remained near multi-year lows in the face of indications a supply glut will continue into 2016.

In late morning deals on Wednesday in London, Brent North Sea crude for delivery in February was down 89 cents at US$36.90 per barrel.

US benchmark West Texas Intermediate (WTI) shed US$1.07 to US$36.80 compared with Tuesday's closing level.

Analysts expect US commercial crude stockpiles in the week to December 25 to have declined when the Department of Energy releases the data later Wednesday, but Bloomberg News said that would still leave supplies more than 120 million barrels above the five-year seasonal average.

US oil production is expected to remain above 9.1 million barrels per day, which would bring little respite to the crude oversupply that has kept prices down for more than a year, analysts said.

"The inventory data is likely going to be the most important set of news that we would be seeing this week," Daniel Ang, an analyst with Phillip Futures in Singapore, said in a market commentary.

"Most likely, production would disappoint us and remain above 9.1m barrels/day," he added.

At a meeting earlier this month, the Organization of the Petroleum Exporting Countries effectively rejected calls for output cuts to boost prices.

Iran is also expected to ramp up its oil exports after Western economic sanctions are lifted next year as part of a deal reached in July to curb Tehran's nuclear programme, further exacerbating the supply and demand imbalance.

Oil had collapsed early last week, with Brent striking an 11-year low on the back of a stubborn global supply glut that has plagued the market.

On December 21, WTI slumped to US$33.98 - the lowest price since mid-February 2009. One day later, Brent crude tumbled to US$35.98 - the weakest level since early July 2004.

AFP