Oil prices rise on forecasts of lower US inventories

LONDON: Oil prices rose on Tuesday as expectations of a drawdown in US 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. US light crude was 25 cents higher at $50.49 a barrel.

Both benchmarks recovered from fourmonth lows last week on expectations that the Organization of the Petroleum Exporting Countries (OPEC) 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 US, 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.

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 stateowned National Oil Corp. (NOC) 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 the Organization for Economic Co-operation and Development (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.