Oil price drift lower before US inventories update

 World oil  prices nudged lower Thursday before a key US snapshot of crude stockpiles, one day after striking 12 year lows on abundant global supplies.

In midday deals in London, Brent North Sea crude for delivery in March slid 21 cents to $27.67 per barrel compared with the close on Wednesday.

US benchmark West Texas Intermediate (WTI) for March dipped 34 cents to $28.01 a barrel.

Expectations that the US Energy Information Administration (EIA) will later report another increase in the country's commercial crude stockpiles weighed down on sentiment, analysts said.

"There is still no end in sight to the nose-diving prices on the oil market," said Commerzbank (Xetra: CBK100 - news) analyst Carsten Fritsch.

Rising inventories in the world's biggest oil consuming nation would deepen a global supply glut that has plagued the market.

The weekly EIA inventories report is due for publication one day later than normal owing to a US public holiday on Monday.

Traders were also on edge ahead of Thursday's upcoming interest rate decision from the European Central Bank.

So far this year, oil has taken a hammering, with both main contracts already down about one quarter in value.

The commodity crashed further on Wednesday, with Brent striking $27.10 -- last seen in early November 2003.

And WTI struck $26.19 -- a level witnessed in May of the same year.

After a calamitous start to the year, oil prices have crumbled further this week after the International Energy Agency (IEA) warned that the market could "drown in oversupply", with the return of Iranian crude after the lifting of Western sanctions offsetting any output cuts from other countries.

Oil was slammed also by plunging global stock markets and a gloomy International Monetary Fund downgrade to world economic growth.

Since mid-2014, meanwhile, prices have collapsed by about 75 percent, hit by a perfect storm of a supply glut, weak demand, a slowing global economy and a strong dollar.

"With (Other OTC: WWTH - news) oil already hitting such a low, fundamentals are the key issue right now," said Phillip Futures analyst Daniel Ang, referring to the fact that supplies are continuing to outstrip demand.

While prices are expected to remain subdued, some analysts said they could be close to the bottom.

"I would think the bearishness will continue into the first half of the year, but in terms of hitting a bottom, we are more or less there," Ang added.

"I'm really sceptical of prices hitting below $20," he said, adding that "$24-$25 will likely prove a very strong support that shouldn't break".

BMI Research said the strong dollar will also help push down prices of commodities, including oil.

Many commodities are traded in dollars, making them more expensive to holders of weaker currencies.

"The ongoing depreciation of emerging market currencies and strength in the US dollar will keep commodities prices in check over the first half of 2016 and several of them are likely to reach new lows in the coming months," BMI Research added in a note.