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Oil prices down in thin pre-holiday trade

[SINGAPORE] Crude edged lower in thin pre-holiday trade Wednesday ahead of the release of a key US supply report, as analysts predicted a rebound in prices in the new year after shedding nearly 50 per cent since June.

US benchmark West Texas Intermediate for February delivery fell 63 cents to US$53.49 while Brent crude for February eased 91 cents to US$56.99 in afternoon trade.

Trading volumes were low with many dealers away ahead of the New Year's Day holiday on Thursday. Financial markets in Japan, Indonesia, the Philippines, South Korea, and Thailand are closed Wednesday.

With few other trading cues, dealers are closely watching the latest official US stockpiles report to be released later Wednesday for clues about demand in the world's top crude consumer, analysts said.

Analysts polled by the Wall Street Journal expect US crude reserves to have dipped by 600,000 barrels in the week to December 26.

Daniel Ang, investment analyst at Phillip Futures in Singapore, said there are expectations for a rebound in prices in 2015.

Oil has tumbled since June owing to slowing growth in China and emerging-market economies, a recession in Japan and a near-stall in the eurozone.

On top of that, the Opec oil-producing cartel last month said it would maintain output levels despite ample global supplies, in part due to cheaper oil extracted from North American shale rock.

Ang said the global supply glut could likely be alleviated by current low oil prices affecting "existing shale oil rigs, causing them to shut off, keeping US crude oil production in check".

On the demand side, stimulus measures by major economies could boost growth, and in turn, crude demand, Mr Ang said in a commentary.

"In 2015 we believe that crude demand would be linked to how China, Japan and the eurozone perform," he said.

"If we start to see the situation for these countries improve, a reversal from the demand side could happen," he added.