Oil prices edge down as slowing demand adds to high output

By Henning Gloystein

SINGAPORE (Reuters) - Crude oil futures came under renewed pressure early on Tuesday as fears of slowing demand added to near-record global production levels, which have already slashed prices by two-thirds since the middle of last year.

Front-month U.S. West Texas Intermediate (WTI) futures were trading at $36.75 per barrel at 0105 GMT, down 6 cents from Monday's close.

The international benchmark Brent was at $36.59 per barrel, down 3 cents from their last close and less than a dollar away from 11-year lows reached earlier in December.

Both contracts are down by two-thirds since prices started tumbling in June 2014.

While output from exporters like Russia, the Organization of the Petroleum Exporting Countries (OPEC) and U.S. shale drillers has been at or near record highs, demand has so far held up strong, preventing oil prices from falling even lower.

That may be about to change.

Oil analysts JBC Energy said that refined oil "product demand growth in Europe turned negative in October (-170,000 barrels per day year-on-year)" for the first time in 10 months and that diesel and gasoline demand growth in China, one of the strongest price supporters of the past year, was also slowing.

"The demand situation does not support a return to a higher price environment," derivatives exchange CME Group said.

"China is still decelerating. Growth in emerging markets is slow. Europe may grow 1 percent to 2 percent in real GDP terms, the U.S. a little better, and Japan a little less. No major demand surges here," it said, adding that demand was also sagging due to improving transport efficiency.

One change in oil trading has been that WTI flipped to a premium versus Brent this month after the United States lifted a decades-old ban on exporting U.S. crude oil.

Analysts expect this price structure to stay in place, especially should global markets suffer from slowing demand and ongoing high supplies while the United States tightens.

U.S. shale drillers have piled up huge amounts of debt and are struggling to stay in business as low prices hit their revenues and ability to pay down loans.

"The ongoing low oil-price environment points furiously towards a rough 2016 for U.S. producers," oil analysis firm ClipperData said, with some estimates pointing to a 500,000 barrels per day (bpd) fall in U.S. production in 2016.

However, with most analysts estimating global production exceeding demand by at least that amount and perhaps even more than 2 million bpd, even such a cut in the U.S. would unlikely be enough to fully rebalance world oil supply and demand.

(Editing by Himani Sarkar)