Oil prices rebound after reaching 11-year lows

Oil prices edged up off 11-year lows on Tuesday, though a bearish outlook for 2016 and weaker profits for refining oil products kept a lid on gains. Brent crude for January delivery touched $36.05 a barrel earlier in the day, a penny above a July 2004 low that will be its next resistance level, before rebounding to just under $36.50 a barrel later.

US West Texas Intermediate crude futures flipped to a premium to Brent briefly, before retreating to a slight discount at $36.45 a barrel. The US benchmark touched its lowest level since 2009 at $33.98 in the previous session.

Traders squared positions ahead of a traditional period of low liquidity between Christmas and New Year’s Day as they covered short positions, bolstering US crude.

Expectations of another weekly build-up in US crude stocks added to general bearish sentiment. Analysts, on average, reckon that crude stocks were up 1.4 million barrels in the week ended December 18th, according to a Reuters poll taken ahead of weekly inventory reports from industry group American Petroleum Institute and the US department of energy’s energy information administration.

Concerns about global crude supplies continuing to outstrip demand next year limited price gains.

“We view the oversupply as continuing well into next year before rebalancing in the fourth quarter 2016,” Goldman Sachs said in a report circulated on Tuesday.

“Our base case remains that the global oil stock build will on aggregate remain shy of storage capacity, although the storage buffer has once again narrowed.”