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LONDON, (Reuters) - Oil gained slightly on Thursday, but held close to an 11-year low, pressured by a relentless build in oversupply, and as the dollar strengthened after the U.S. Federal Reserve raised interest rates for the first time in nearly a decade.
Brent crude for February delivery, the front-month contract from Thursday, rose 20 cents to $37.59 a barrel by 1143 GMT. The global benchmark lost 3.3% in the previous session.
A dip below $36.20 will be the lowest since July 2004. Analysts said such a move in the run up to year-end would be likely.
“The price action is likely to remain violent, but the odds are on lower numbers,” said PVM Oil Associates technical analyst Robin Bieber. “Stick with the trend. It is not advised to be long.”
Government data showed a surprise build in U.S. inventories on Wednesday, adding to a global glut that has contributed to a near 17% slump this month alone. Brent has tumbled from a high above $115 in June last year.
West Texas Intermediate for January delivery, the front-month contract, was down 17 cents at $35.35. U.S. crude fell nearly 5% on Wednesday.
Another potential source of supply for international markets would be U.S. crude should lawmakers vote to lift a ban on exports as early as Friday.
The likely lifting of the ban has seen Brent crude’s premium to WTI shrink to below $1 per barrel. The premium was above $13 per barrel in March.
“OPEC countries are cutting price to get market share, and they’ll have to do so even more if U.S. oil comes onto the international market,” Jasper Lawler, analyst at CMC markets said.
The Fed raised rates on Wednesday, a sign it believes that the U.S. economy had largely overcome the calamity that was the 2007-2009 financial crisis.
Higher U.S. rates typically support the dollar, making dollar-priced oil more costly for holders of other currencies and undermining demand.
The dollar added around 1% against a basket of major currencies.
Adding to the bearish global picture, OPEC producers see scant chance of a significant rise in oil prices in 2016 as extra Iranian production could add to the glut and the prospect of voluntary output restraint remains remote.
Goldman Sachs said it would take a further fall in oil prices to push OPEC into coordinated cuts in production to support prices.
“The one scenario where we could see OPEC cut output is one where fundamentals push prices down to the steep part of the cash-cost curve,” the bank said in a note to clients.
“Such a cut would occur at lower prices and for now the market needs to rebalance through low prices.”
