Picture: ISTOCK
Picture: ISTOCK

New York — Oil prices rose for the first time in three days on Wednesday ahead of the US weekly inventory data, following news of Saudi supply cuts to Asia.

But, traders said persistent doubt over output reductions and signs of rising shipments from other producers kept gains in check.

"We expect some bullish Organization of the Petroleum Exporting Countries (Opec) rhetoric to ramp up in an attempt to neutralize the bearish vibes that have emanated from the recent production increases indicated out of Libya, Iran, Iraq and Nigeria," Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note.

Analysts forecast US crude inventories increased by 1.2-million barrels last week, according to a Reuters poll. That compared with a build of 1.5-million barrels, according to data late on Tuesday from the American Petroleum Institute, an industry group.

The US Energy Information Administration (EIA) will release its weekly petroleum status report at 13.30pm GMT on Wednesday.

After both Brent and US crude futures settled at their lowest levels in a month on Tuesday, Brent was up 65c, or 1.2%, at $54.29 a barrel.

US West Texas Intermediate (WTI) rose 56c, or 1.1%, to $51.38 per barrel.

At their lows on Tuesday, both benchmarks surrendered about 40% of the gains made between late November and early January following the Opec agreement to cut output.

Analysts, however, said the slide was unlikely to become more aggressive, given the likelihood of Saudi Arabia and its Gulf neighbours to at least stick to their pledge to cut output.

"Few envision that Brent crude at sub-$50 a barrel is a viable price (in the first half of 2017) amid Opec production cuts tightening up the market," SEB commodities strategist Bjarne Schieldrop said.

Saudi Arabia, the world’s top oil exporter, has told some of its Asian customers that it will reduce their crude supplies slightly in February.

But there is still plenty of oil to fill the gaps left by Opec. North American drilling is on the rise, while European and Chinese traders are shipping a record 22 million barrels of crude from the North Sea and Azerbaijan to Asia this month.

"Traders continued to fret about rising US supply and compliance by Opec to agreed-upon production cuts," ANZ bank said.

US crude production was projected to rise by 110,000 barrels per day in 2017 to 9 million bpd, according to EIA data.

Opec’s second-biggest producer Iraq plans to raise crude exports from its southern port of Basra to an all-time high of 3.641-million bpd in February, keeping shipments high even as Opec production cuts take effect this month.

Reuters

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