Oil prices edge up but no end to glut in sight

Oil prices edged higher on Wednesday after a report showed inventories fell at a key U.S. delivery hub last week, but without further evidence of more aggressive output cuts, gains were expected to be temporary.

Investors are awaiting official inventory data due out later on Wednesday that is expected to show further stockpiling at a time when the world’s largest oil exporters are pumping at record rates to retain market share.

Brent December crude futures LCOc1 were up 38 cents at $47.19 a barrel at 0905 GMT, having fallen to their lowest since mid-September on Tuesday and unwinding the rally that took the price to a peak of $54 earlier this month.

U.S. crude for December delivery CLc1 rose 40 cents to $43.60 a barrel, up from Tuesday’s nine-week low of $42.58.

“I’m bearish going into Q1 … and what was quite telling is the last rally did not go further than $54 and it was just sold down,” SEB analyst Bjarne Schieldrop said.

“The whole signal that OPEC members are undercutting each other is not sending a great signal to the market.”

Iraq’s southern oil exports have reached 3.10 million barrels so far this month, indicating continued high output from the larger members of the Organization of the Petroleum Exporting Countries.

The premium for crude for delivery in 12 months’ time over that for December delivery, or contango, rose to its highest in six weeks, often a sign that investors expect supply to be far more plentiful in the near term. LCOc12

On the physical market, the contango in the North Sea derivatives market, which underpins Brent futures, rose to its highest since early September this week, reflecting how excess barrels are weighing on near-term prices.

“The global glut is still very much weighing on investors’ minds at the moment,” said Ben le Brun, a market analyst at OptionsXpress in Sydney.

“Some of the major corporates such as BP are talking about sluggish prices through 2016,” he added.

BP on Tuesday announced further spending cuts and more asset sales over the coming years to tackle an extended period of low oil prices and help pay for its $54 billion U.S. oil spill settlement.

Crude stocks at the Cushing delivery hub fell by 748,000 barrels, data from the industry group, the American Petroleum Institute, showed late on Tuesday.

The U.S. Department of Energy’s Energy Information Administration will release its official crude oil and oil product data at 1430 GMT on Wednesday.

Investors are also awaiting a statement by the U.S. Federal Reserve later on Wednesday, at which it is expected to leave interest rates unchanged.