By Jenny W. Hsu

Crude futures regained momentum in early Asian trade Wednesday after a strong selloff overnight, even as investors remain unsure whether the recent oil production cut deal can help restore supply and demand balance in the market.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at $50.97 a barrel at 0357 GMT, up $0.15 in the Globex electronic session. March Brent crude on London's ICE Futures exchange rose $0.13 to $53.77 a barrel.

Analysts said buying was mainly driven by bargain-hunting after prices fell over 6% in the past two U.S. trading sessions. The headwind was a result of signs that some producers inside the Organization of the Petroleum Exporting Countries were ramping up production faster than expected, while others such as Iran, were aggressively selling off their inventories.

The Wall Street Journal reported Tuesday that Libyan militias have struck deals to allow the National Oil Co., or NOC, to reopen important petroleum-producing infrastructure. As a result, Libya's production rose to a three-year high of 708,000 barrels a day this week, an NOC spokesman said, after having fallen to less than 200,000 barrels a day.

NOC believes it could hit 900,000 barrels a day this year, up from average daily production of 575,000 barrels a day in November when OPEC struck its deal.

Iran, which has been exempted from the production cut deal has apparently sold off over a dozen million barrels in less than two months. According to data provided by a shipbroker, Iran moved about 13.2 million barrels of oil from its floating storage in the period between November 16 and January 7.

"Most of the barrels were exported to Asia, mainly China," the shipbroker said.

Given that the production pact became effective earlier this month, early impact of the reduction won't be known until mid-February when OPEC releases its January production data.

U.S. crude inventories are also making traders bearish. They likely rose by 700,000 barrels in the week ended Jan. 6, according to a survey by The Wall Street Journal. The 13 forecasters in the survey also expect gasoline stockpiles to have grown by an average of 1.6 million barrels and distillate stocks, which include heating oil and diesel, to be higher by 500,000 barrels.

Official data, including production figures, from the Energy Information Administration will be released later today.

The American Petroleum Institute, an industry group, said late Tuesday that its own data for the week showed a 1.5-million-barrel increase in crude supplies, a 1.7-million-barrel rise in gasoline stocks and a 5.5-million-barrel increase in distillate inventories, according to a market participant.

Oil betters are also scrutinizing the U.S. production trend which had abated in the past two years when oil prices fell and investment in the energy sector fumbled. However, with prices creeping up the U.S. Department of Energy has raised its production forecast.

The DOE now expects U.S. crude production to average 9 million barrels a day this year and 9.3 million barrels in 2018. In the week ended December 30, U.S. production stood at 8.8 million barrels a day.

"We see these estimates as conservative, with room for both figures to walk higher in the months ahead," said analysts at Citi Futures.

Increased U.S. production could undermine OPEC's effort to rein in global production and even prompt OPEC members to ignore their quotas and produce more in order to defend their market share.

Nymex reformulated gasoline blendstock forFebruary--the benchmark gasoline contract--rose 107 points to $1.5574 a gallon, while February diesel traded at $1.6135, 21 points higher.

ICE gasoil for January changed hands at $470.25 a metric ton, down $2.50 from Tuesday's settlement.

Write to Jenny W. Hsu at jenny.hsu@wsj.com

(END) Dow Jones Newswires

January 10, 2017 23:52 ET (04:52 GMT)

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