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[LONDON] Oil prices edged up on Wednesday after an unexpected fall in U.S. crude inventories but remained not far above 11-year lows as supplies remain abundant and as OPEC lowered the demand outlook for its exports.
US crude futures briefly traded above benchmark Brent prices, a trading pattern rarely seen over the last five years.
At 1035 GMT, Brent crude futures were up 41 US cents at US$36.52 a barrel, while West Texas Intermediate (WTI) futures were up 33 cents at US$36.47.
A day earlier Brent touched US$35.98, its lowest since July 2004.
The Organisation for Petroleum Exporting Countries (Opec) in a report on Wednesday forecast that demand for its crude would be lower in 2020 than in 2016 as rival producers prove more resilient than expected in a low oil price environment.
It forecast 2020 demand for Opec crude at 30.7 million barrels per day (bpd) versus 30.9 million bpd in 2016 and about 1 million bpd less than it is currently producing.
Opec raised its forecast for tight oil output to 5.19 million bpd in 2020, up from 4.50 million bpd in its 2014 report.
In a sign of growing competition for market share among OPEC members in Asia, Iraq signed a US$1.4 billion deal to supply 160,000 bpd to Indian refiners Reliance and Indian Oil Corp .
Iran is expected to add 500,000 bpd of crude exports next year and Iranian officials have already met with Indian refiners seeking proposals on how to make their crude more competitive.
On Wednesday, Brent traded as low as US$36.28 a barrel, flipping WTI from a long-standing discount into a slight premium over the international benchmark for the first time since a short period in November 2014.
"The move with WTI trading above Brent is not fundamentally justified. It is overdone and you are likely to see some correction in that when markets return to some kind of normality in terms of volumes," said Virendra Chauhan, analyst at oil consultancy Energy Aspects.
US crude inventories fell by 3.6 million barrels last week to 486.7 million, data published by the American Petroleum Institute showed on Tuesday. Analysts had expected an increase of 1.1 million barrels.
Official inventory data will be published on Wednesday. "Inventories remain very, very high relative to the previous year and relative to the five-year norm," Mr Chauhan said.
Since 2010, US petroleum imports have fallen from a peak of almost 14 million barrels per day (bpd) to around 9 million bpd, government data shows.
But as shale output dips and the government eases restrictions on crude exports, the US market could tighten while global supplies swell on sustained high output from Russia and Opec.
Although no immediate large-scale exports are expected, some US oil will likely flow from the United States into the global market next year.