OPEC sees global oil demand inching towards 1.5m bpd in 2017

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"Stale speculative long positioning and a reluctance to hold unprofitable positions has been the main force behind the oil rally running out of steam over the last few sessions", said Jeffrey Halley, senior market analyst at brokerage OANDA.

Official U.S. data is released late Wednesday morning.

Oil prices edged up on Wednesday on a fall in USA crude inventories, although markets were still being weighed down by general oversupply.

On the balance situation, a survey of analysts from S&P Global Platts revealed expectations of a 3.6 million drop in US crude oil inventories and a 400,000 barrel decline for gasoline.

On Monday, oil prices dropped by 2.5 percent to their lowest close in three weeks, with WTI Crude settling at US$47.59, the lowest level since July 24.

USA crude inventories probably shrank by 3.5 MMbbl last week, according to the Bloomberg survey.

Markets were expecting a draw of around 3.5 million barrels for the week, although with inevitable caution given volatile API data over the past 2 months.

US West Texas Intermediate (WTI) crude futures were at $47.71 a barrel, up 16 cents, or 0.3 per cent.

Brent Crude
Daily November Brent Crude

"The market took this as a mildly bullish report", said William O'Loughlin of Australia's Rivkin Securities. While that narrowed the surplus, stockpiles were still 219 million barrels above the five-year average at the end of June, the agency said.

More broadly, analysts said ample supply was preventing prices from moving much higher.

Neil Atkinson, head of the agency's oil markets and industry division, told Bloomberg, "If they wish to achieve the reduction of oil stocks down to the five-year average, they're going to have to dig in for the long haul", and he added that any increase in price they may achieve will bolster USA shale production and exacerbate the glut.

The recent OPEC/non-OPEC capacity cuts have meant that India has had to diversify its crude suppliers, with state-run refiners making purchases of USA crude grades.

"Excessive supply.is continuing to weigh on oil prices".

The industry-funded American Petroleum Institute will release its inventory data later on Tuesday.

Offsetting much of that effort, however, USA oil production has soared by nearly 12 per cent since mid-2016 to 9.42 million bpd. Even so, Citigroup Inc.'s Ed Morse says shale will win over OPEC on oil, as USA drillers can survive due to hedging.

This means that oil demand from the world's two biggest consumers may soon stall, while consumption has already peaked in Europe and Japan.

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