Oil prices rose on Tuesday as expectations of a drawdown in U.S. crude and product inventories outweighed news of higher Libyan production. Benchmark Brent crude oil was up 40 cents at $53.52 a barrel by 1310 GMT. U.S. light crude was 25 cents higher at $50.49 a barrel. Both benchmarks recovered from four-month lows last week on expectations that the Organization of the Petroleum Exporting Countries would manage to tighten supply by cutting production under a deal agreed at the end of last year.
Demand is picking up ahead of summer in key markets, including the United States, the world’s biggest oil consumer, where analysts forecast industry data this week will show a decline in oil inventories. US crude stocks probably declined last week after rising for two consecutive weeks, and refined product inventories were also expected to have fallen, a Reuters survey showed.
The American Petroleum Institute reports inventory data at 4:30 p.m. EDT (2030 GMT) on Tuesday, while the U.S. government’s Energy Information Administration will announce official stock figures on Wednesday at 10:30 a.m. EDT (1430 GMT).
“U.S. product stocks need to be watched closely, since they have fallen massively over the last few weeks,” said Carsten Fritsch, commodities analyst at Commerzbank in Frankfurt. But global inventories remain stubbornly high and investors are betting that it will take many months for oil prices to respond convincingly to lower OPEC output.
Libya’s crude output increased after state-owned National Oil Corp lifted a force majeure on loadings of Sharara oil from the Zawiya terminal in the west of the country, sources familiar with the matter told Reuters.
UBS analyst Giovanni Staunovo said OPEC was taking longer than expected to tighten the oil market but recent data suggested the process was now well under way. “We believe the implemented production cuts will trigger a material drawdown in OECD oil inventories and thus higher crude oil prices,” Staunovo said. “We expect Brent oil prices to rise above $60 a barrel in three months.”
US light crude may drop to $49.62 a barrel as it failed to break resistance at $50.95, said Reuters commodities markets technical analyst Wang Tao. Brent crude may retrace back to $52.79 per barrel, he said.