Brent crude touched an 11-year low yes­ter­day, re­bound­ing slight­ly af­ter set­tle­ment, as a bear­ish out­look for 2016 and weak­er prof­its for re­fin­ing oil prod­ucts kept a lid on gains.

Brent crude for Feb­ru­ary de­liv­ery set­tled at US$36.11 a bar­rel, af­ter ear­li­er dip­ping to US$35.98, be­low an eleven-year low.

US West Texas In­ter­me­di­ate (WTI) crude fu­tures flipped to a pre­mi­um to Brent, set­tling at $36.14 a bar­rel, up 33 cents, or 0.92 per cent.

Both bench­marks saw a boost late in the day af­ter the Amer­i­can Pe­tro­le­um In­sti­tute, an in­dus­try trade group, re­leased da­ta show­ing an un­ex­pect­ed drop in stock­piles. US crude rose to US$36.46, while Brent climbed to US$36.38. The API sug­gest­ed in­ven­to­ries fell 3.6 mil­lion bar­rels in the week end­ed De­cem­ber 18, com­pared with an ex­pect­ed 1.1-mil­lion-bar­rel in­crease.

Brent's weak­ness as WTI strength­ened slight­ly brought the two bench­marks in­to par­i­ty for the first time since Jan­u­ary of this year.

"With the (US) ex­port ban be­ing lift­ed, we've seen that spread col­lapse, and it's go­ing to con­tin­ue in that di­rec­tion as de­mand be­comes greater for WTI glob­al­ly," said Matthew Per­ry, part­ner at Kro­nen­berg Cap­i­tal Ad­vi­sors. "We ex­pect that spread to stay very nar­row, and there will be times when WTI will be at a pre­mi­um."

Traders squared po­si­tions ahead of a tra­di­tion­al pe­ri­od of low liq­uid­i­ty be­tween Christ­mas and New Year's Day as they cov­ered short po­si­tions, bol­ster­ing US crude.

"It's some­what of a de­fen­sive pos­ture and a rea­son­able pos­ture be­fore the be­gin­ning of the year," said John Saucer, vice pres­i­dent at Mo­bius Risk Group in Hous­ton.

Mean­while, Sau­di Ara­bia, the world's largest oil ex­porter, said it had shot down a bal­lis­tic mis­sile that was head­ing to­ward the city of Jizan, where a new re­fin­ery and oil ter­mi­nal are un­der con­struc­tion. Sau­di Aram­co said all its fa­cil­i­ties in the area were "in safe and nor­mal op­er­a­tion."

Con­cerns about glob­al crude sup­plies con­tin­u­ing to out­strip de­mand next year lim­it­ed price gains.

"We view the over­sup­ply as con­tin­u­ing well in­to next year be­fore re­bal­anc­ing in the fourth quar­ter 2016," Gold­man Sachs said in a re­port cir­cu­lat­ed on Tues­day.

"Our base case re­mains that the glob­al oil stock build will on ag­gre­gate re­main shy of stor­age ca­pac­i­ty, al­though the stor­age buffer has once again nar­rowed."

Gold­man an­a­lysts said a high­er-than-ex­pect­ed 1.5 mil­lion bar­rel a day glob­al mar­ket im­bal­ance in this quar­ter is like­ly to ex­tend in­to the first half of 2016 be­cause of milder-than-usu­al weath­er weigh­ing on de­mand.

The weath­er pro­vid­ed a fur­ther bear­ish el­e­ment as an un­usu­al­ly mild start to the win­ter in the north­ern hemi­sphere weak­ens de­mand for heat­ing oil.