By Jenny W. Hsu and Neanda Salvaterra
Crude prices edged higher Wednesday on the heels of a sharp selloff, even as investors remained unsure whether the deal by major oil producers to curtail output would help restore balance in the market.
U.S. crude futures recently rose 57 cents, or 1.12%, to $51.39 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 70 cents, or 1.3%, to $54.34 a barrel on ICE Futures Europe.
Analysts said Wednesday's uptick in prices was mainly driven by bargain hunting after prices fell over 6% earlier in the week.
"Right now it's just consolidating. You've had very little retracement up until now," said Ric Navy, senior vice president for energy futures at RJ O'Brien & Associates.
Investors are bracing for more bad news following signs that some producers inside the Organization of the Petroleum Exporting Countries have been ramping up production faster than expected, while others such as Iran, have aggressively sold 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.
Meanwhile, Iran, which has been allowed to increase its output under the deal, moved about 13.2 million barrels of oil from its floating storage in the period between Nov. 16 and Jan. 7, according to data provided by a shipbroker.
The early impactof OPEC's agreement with several large producers outside the cartel to cut output won't be known until mid-February, when OPEC releases its January production data. The pact became effective earlier this month.
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. Official data from the Energy Information Administration will be released later Wednesday.
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, according to a market participant.
Oil traders are also scrutinizing U.S. production, which slowed during 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 Dec. 30, U.S. production stood at 8.8 million barrels a day.
"We are going to see continued upward revisions of U.S. production and it is going to temper the OPEC supply action," said Bjarne Schieldrop, chief commodities analyst at SEB Markets.
Gasoline futures rose 2.91 cents, or 1.88%, to $1.5758 a gallon. Diesel futures rose 2.38 cents, or 1.48%, to $1.6352 a gallon.
Alison Sider contributed to this article.
Write to Jenny W. Hsu at email@example.com and Neanda Salvaterra at firstname.lastname@example.org
(END) Dow Jones Newswires
January 11, 2017 10:26 ET (15:26 GMT)
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