Oil prices fall to below $40 a barrel ahead of US inventories data

Oil prices continued to fall in global markets as traders awaited the release of data on US commercial crude stockpiles and production.

On Wednesday, the oil market was highly unstable on the eve of the New Year and in the final week of 2015 as prices remained close to multi-year lows amid indications that a supply glut will continue into 2016, AFP reported.

In London market and during late morning deals, Brent North Sea crude for delivery in February lost 89 cents to be sold at USD 36.90 per barrel.

Every barrel of US benchmark West Texas Intermediate (WTI) also shed USD 1.07 to hit USD 36.80 compared with closing level on Tuesday.

The continued price fall came as analysts expected to see a decline in US commercial crude stockpiles during the week to December 25, when the Department of Energy releases the data later Wednesday.

Bloomberg News, however, announced that even in the case of decline in US stockpiles there would be supplies more than 120 million barrels above the five-year seasonal average.

According to available figures, US oil production is expected to remain above 9.1 million barrels per day, which will be of little help to a market already plagued with a crude oversupply that has kept prices down for more than a year.

"The inventory data is likely going to be the most important set of news that we would be seeing this week," Daniel Ang, an analyst with Phillip Futures in Singapore, said in a market commentary, adding, "Most likely, production would disappoint us and remain above 9.1 million barrels a day."

The Organization of the Petroleum Exporting Countries, OPEC, effectively rejected calls to reduce its crude production in a bid to boost prices at a meeting earlier this month.

To make the situation more complicated, Iran is also expected to ramp up its oil exports after Western sanctions against its energy section are lifted next year as part of a deal reached in July. According to the agreement between Iran and the six world powers, known as the Joint Comprehensive Plan of Action (JCPOA), limitations will be put Tehran's nuclear program in return for removal of sanctions on the country’s economic sectors.

Oil prices had also collapsed early last week, with Brent crude hitting an 11-year low as a result of unabated global supply glut that has plagued the market since last year.

On December 21, WTI slumped to USD 33.98 -- the lowest price since mid-February 2009. One day later, Brent crude tumbled to USD 35.98, which was the weakest level recorded since early July 2004.

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