Oil prices edge down but set for biggest yearly rise since 2016

* Brent, WTI futures each down 0.2%
* Benchmarks on track for biggest annual gain in 3 years
* U.S. crude stocks fell about 3.2 mln bbls last week -poll

By Jane Chung
SEOUL, Dec 31 (Reuters) - Oil prices edged lower on the
final day of the year on Tuesday, but were on track for their
biggest annual rise since 2016, supported by a thaw in
U.S.-China trade dispute and ongoing supply cuts.
Brent crude futures for March delivery LCOc1 , the new
front month contract, were down 11 cents, or 0.2%, to 66.56 a
barrel by 0158 GMT, while U.S. West Texas Intermediate (WTI)
crude for February CLc1 was down 11 cents, or 0.2%, at $61.57
per barrel. Brent for February delivery LCOG0 closed on Monday
at $68.44.
Brent has gained about 24% in 2019 and WTI has risen roughly
36% for the year. Both benchmarks are set for the biggest yearly
gain in three years, backed by a breakthrough in U.S.-China
trade talks and output cuts pledged by the Organization of
Petroleum Exporting Countries (OPEC) and its allies.
The White House's trade adviser said on Monday that the
U.S.-China Phase 1 trade deal would likely be signed in the next
week.
"Oil prices have followed the general de-risking drift into
year-end despite a rise in Middle East tensions and last week's
bullish-for-oil-price inventory draws as the broader markets
appear to be losing some of that holiday cheer," said Stephen
Innes, chief Asia market strategist at AxiTrader.
Tensions remain high in the Middle East after U.S. air
strikes on Sunday against the Katib Hezbollah militia group in
Iraq and Syria. Operations resumed at Iraq's Nassiriya oilfield
resumed on Monday after protesters briefly halted production.

Looking ahead, U.S. crude inventories are expected to fall
by about 3.2 million barrels in the week to Dec.27, heading for
a third consecutive weekly fall, a preliminary Reuters poll
showed on Monday. U.S. stockpiles fell by 5.5 million barrels in
the week to Dec. 20. The figures will be released on
Friday. EIA/S
Innes said traders would also closely watch the EIA's U.S.
October crude production figures, set to come out later on
Tuesday.
"It's expected to show robust continuous growth in the
agency's short-term outlook," he said.
The United States is on track to become a net petroleum
exporter on an annual basis for the first time in 2020, with its
oil output expected to rise by 930,000 barrels per day (bpd) to
a record 13.18 million bpd next year, the EIA said earlier this
month. Brokers and analysts expect the growing U.S. supplies to
offset cuts from OPEC in 2020 amid weakening worldwide demand,
keeping oil prices rangebound.