UPDATE 8-Oil prices rebound off 11-year lows, bearish outlook caps gains

* U.S. crude trades at a premium to Brent
* U.S. crude weekly stocks expected to rise again
* Saudi Arabia said shot down missile heading for oil town
* Market to rebalance in fourth quarter 2016 -Goldman Sachs

(Updates trading, adds premium of WTI to Brent, changes
dateline to New York; previous London)
By Karolin Schaps and Jessica Resnick-Ault
NEW YORK, Dec 22 (Reuters) - Oil prices edged up off 11-year
lows on Tuesday, though a bearish outlook for 2016 and weaker
profits for refining oil products kept a lid on gains.
Brent crude LCOc1 for January delivery touched $36.05 a
barrel earlier in the day, a penny above a July 2004 low that
will be its next resistance level, before rebounding to $36.46 a
barrel at 11:38 a.m. EST (1638 GMT).
U.S. West Texas Intermediate (WTI) crude futures CLc1
flipped to a premium to Brent briefly, before retreating to a
slight discount at $36.45 a barrel. The U.S. benchmark touched
its lowest level since 2009 at $33.98 in the previous session.

Traders squared positions ahead of a traditional period of
low liquidity between Christmas and New Year's Day as they
covered short positions, bolstering U.S. 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.
There's a cap on how far the upward momentum can go, though,
said Brian LaRose, technical analyst at ICAP (L:IAP).
"Unless you can get back above $38.75, I can't entertain the
possibility for a bottom unfolding," he said.
From a technical standpoint, the price movement downward
from the highs in mid-October indicate that the current lows
could still be breached, he said.
Gasoline margins coming off this week and persistently weak
middle distillate margins are also weighing on the oil price
complex, Olivier Jakob from Petromatrix consultancy said.

Expectations of another weekly build-up in U.S. crude stocks
added to general bearish sentiment. Analysts, on average, reckon
that crude stocks were up 1.4 million barrels in the week ended
Dec. 18, according to a Reuters poll taken ahead of weekly
inventory reports from industry group American Petroleum
Institute (API) and the U.S. Department of Energy's Energy
Information Administration (EIA).
Meanwhile Saudi Arabia, the world's largest oil exporter,
said it had shot down a ballistic missile that was heading
towards 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."

EXCESS SUPPLY
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 (N:GS)
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 that 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.
Energy Aspects also expects the market to rebalance towards
the end of next year but said in a report Tuesday that "the pace
of inventory drawdown will depend on OPEC output."
The weather provided a further bearish element as an
unusually mild start to the winter in the northern hemisphere
weakens demand for heating oil.



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