Oil prices rose towards $52 a barrel on Wednesday, hitting their highest level since June, supported by an industry report that U.S. inventories probably fell for a fifth straight week and OPEC's supply cut deal.
The American Petroleum Institute (API) said on Tuesday that U.S. crude inventories dropped 7.6 million barrels, which would be the fifth straight weekly decline if confirmed by U.S. Energy Information Administration (EIA) data on Wednesday. [API/S]
Brent crude was trading at $51.70 a barrel, up 83 cents, at 0819 GMT. The global benchmark touched $51.72 during the session, its highest since June 10. U.S. crude was up 75 cents at $49.44.
Analysts are expecting a rise in crude stocks of 2.6 million barrels.
But another drop in U.S. crude stocks would reinforce the view that the supply glut that has been weighing on prices since 2014 is easing. The API data, however, does not always tally with the EIA data, which is due at 1430 GMT.
"All eyes now turn to the EIA crude inventory numbers," said Jeffrey Halley, senior market analyst at brokerage OANDA in Singapore, adding that another confirmed drawdown in crude stocks would likely push U.S. crude prices above $50.
Brent has risen from below $49 on Sept. 28, when the Organization of the Petroleum Exporting Countries agreed a surprise cut in its output to support prices which are less than half the level of mid-2014.
Under the deal, OPEC will target production of between 32.50 million barrels per day (bpd) and 33.0 million bpd, implying a cut of as much as 740,000 bpd from the August level, as reported in OPEC's monthly report. [OPEC/M]
The move marked an about-face by OPEC, which in November 2014 dropped its role of cutting production. Although it hasn't yet worked out all the details, and analysts are skeptical the cut will be implemented, the deal is supporting the market.
"The mere threat of a production cut should put a floor under oil prices until the next OPEC meeting on Nov. 30," said Jason Gammel of U.S. investment bank Jefferies.
(Additional reporting by Henning Gloystein; editing by David Clarke)