Oil prices rose on Tuesday thanks to a weakened dollar, supply disruption in Libya and the latest comments from officials suggesting the Organization of the Petroleum Exporting Countries (OPEC) could extend its deal cutting global production.
But crude was weighed down by a resurgence in US shale oil production and the expectation that inventories in the country would once again build, illustrating the persistent global supply overhang that has depressed prices for three years.
Prices for front-month Brent crude futures, the international benchmark for oil, gained 36 cents to $51.11 per barrel by 1105 GMT. West Texas Intermediate (WTI) futures, the US benchmark, were up 38 cents at $48.11 a barrel.
Brent rebounded from testing a support of $50 a barrel on Monday and was underpinned by a weak dollar, which can attract investors to safer commodity markets while making oil cheaper for countries using other currencies.
The dollar was slightly stronger against a basket of other leading currencies on Tuesday but is still trading at levels not seen since last November.
Both Brent and WTI jumped over 20 cents a barrel after it emerged Libya’s oil output had fallen by roughly a third, or 252,000 barrels per day (bpd) because armed factions blocked production at the Sharara and Wafa oilfields.
The contracts also rose after Iranian Oil Minister Bijan Zanganeh said the global oil cut agreement between OPEC and other major producers was likely to be extended.
Nevertheless, Saxo Bank Head of Commodity Strategy Ole Hansen said: “Supply remains in focus ahead of the (US Energy Information Administration) EIA report where an increase of more than 322,000 barrels will see Cushing hit a record.”
Rising stocks at Cushing tend to depress the US benchmark price, widening its discount to Brent, which in turn makes US crude oil attractive to importers. That undermines any OPEC efforts to cut supplies.
Analysts polled by Reuters expect that nationwide crude oil stocks rose by 1.2 million barrels to a fresh record. EIA data is due on Wednesday. A record amount of US crude oil has found its way to Asia and other destinations this year and more is expected to be shipped out as traders take advantage of arbitrage opportunities by sending excess US crude into regions where it can find buyers.

Source: Arab News