UPDATE 3-Brent, U.S. crude oil prices battle for premium in weakening market conditions

* U.S. crude flipped into Brent premium before Christmas
* Brent gains ground post-Christmas
* Both crude benchmarks decline on oversupply
* Japan's oil product sales fall to 46-year lows

(Updates prices, traded volumes)
By Henning Gloystein
SINGAPORE, Dec 28 (Reuters) - International Brent and U.S.
crude oil futures battled for a premium on Monday but both
benchmarks fell in a market in which there is no end in sight
for oversupply that has brought down prices by two-thirds since
the downturn began in mid-2014.
The international crude oil futures benchmark Brent LCOc1
was trading at $37.58 a barrel at 0739 GMT, down 31 cents from
its last settlement. U.S. West Texas Intermediate (WTI) futures
CLc1 were down 47 cents at $37.63 per barrel.
The two benchmarks switched between premium and discount to
each other several times in post-Christmas trading, yet traders
said not to interpret too much into these movements as low
liquidity meant that prices could move abruptly without changes
in price fundamentals.
Trading volumes were down for both contracts in the
post-holiday period, with only around 5,500 front-month Brent
contracts changing hands by 0735 GMT on Monday versus over
272,000 contracts traded on Dec. 7, the first Monday of the
month. There were over 10,000 WTI contracts traded by that time
compared with more than 635,000 dealt on Dec. 7.
Singapore-based Phillip Futures said on Monday that it
expected "a quiet week ahead" with the biggest expected news for
energy markets likely coming from U.S. inventory data to be
published on Wednesday and Thursday.
The U.S. market tightened slightly earlier in December,
pushing it into a premium over global oil markets, following
reduced drilling activity, withdrawals from near record crude
stockpiles and the prospect of crude exports following a 40-year
export ban.
While the U.S. slightly tightened, international markets
remain over supplied as producers like Russia and the
Organization of the Petroleum Exporting Countries (OPEC) produce
between half a million and 2 million barrels of crude every day
in excess of demand.
This is happening while developed and emerging economies
especially in Asia are slowing.
Japan's industrial output fell 1.0 percent in November from
the previous month, government data showed on Monday, suggesting
that sluggish emerging market demand continues to cloud the
outlook for the economy.
In Japan's refining sector, total oil product sales in
November fell to a 46-year low, as a shrinking population and
warmer-than-normal weather dented demand for all of the main
product grades despite lower crude oil prices, trade ministry
data showed on Monday.
Total oil product sales fell 6.9 percent in November from a
year earlier to 3.04 million barrels per day (14.49 million
kilolitres for the whole month), the lowest for the month since
1969, an official with the Ministry of Economy, Trade and
Industry (METI) said.