Oil prices edge up on reports of falling inventories, higher refinery runs

By Henning Gloystein

SINGAPORE (Reuters) - Oil prices edged up on Wednesday following reports of falling stockpiles and rising refinery activity, but analysts said the market would remain under pressure for the rest of the year and into 2016.

Industry group American Petroleum Institute (API) said on Tuesday that U.S. crude stockpiles fell last week by 482,000 barrels due partly to higher refinery runs.

This helped push front-month U.S. crude futures up 28 cents from their last settlement to $40.95 a barrel at 0513 GMT. The gain followed an over $1 fall the previous session.

Official inventory data is due later on Wednesday from the U.S. government's Energy Information Administration (EIA).

Internationally traded Brent crude futures were up 33 cents at $43.90 per barrel.

Despite the slight gains on Wednesday, most analysts expect prices to remain at low levels for the rest of the year and into 2016 as production continues to outpace demand.

"Oil market sentiment has turned back to 'max bearish' mode. Talk of $20 oil is back," consultancy Energy Aspects said in a note this week.

At the core of the bearish sentiment is that every day between 0.7-2.5 million barrels of oil per day are being produced in excess of demand, leading to a glut that is testing the logistics of oil markets.

Onshore inventories across the world are on the brink of being full, a condition known as tank-top, while offshore tanker storage requires prices on the far end of the curve to be higher than prompt deliveries in order to warrant storage.

January 2017 prices are currently trading around $6 a barrel above those for January 2016, not enough to make floating storage attractive as freight costs still have to be included.

"While the growth in U.S. unconventional production appears to be slowly abating, the upsurge in Organization of the Petroleum Exporting Countries (OPEC) output, robust global stock levels, and ongoing uncertainty around the strength of demand suggest that the oversupply and surpluses are likely to continue well into next year, exerting continued downward pressure on prices," the Center for Strategic and International Studies said in its 2016 outlook on Wednesday.

Demand uncertainties, especially in China where the economy is growing at its slowest pace in years, are also hitting other commodities. Copper fell towards six-year lows on Wednesday as traders increased their bets on waning demand in top user China.

(Editing by Michael Perry)