Oil Turns Positive

Oil prices strengthened on Wednesday ahead of US crude inventory data that could give investors a clue as to whether an OPEC-led output cut is making progress in reducing the persistent global supply overhang.

Brent crude was up 33 cents at $51.98 per barrel. US light crude rose 18 cents to $48.84, Reuters reported.

Both benchmark prices started the day in negative territory after industry data from the American Petroleum Institute (API) estimated that US crude stocks had risen by 882,000 barrels in the week ending May 12 to 523 million barrels.

That defied expectations of analysts who estimated a draw in the stockpiles of 2.4 million barrels, according to a Reuters survey. Data from the Energy Information Agency, seen as more complete, was due later on Wednesday.

Brent reached $52.63 a barrel and WTI rose as high as $49.66 on Monday after Saudi Arabia and Russia agreed on the need to extend output curbs by members of the Organization of Petroleum Exporting Countries and other producers.

The supply cuts of 1.8 million barrels per day were initially agreed to run during the first half of 2017. Riyadh and Moscow say they should be extended until March. An extension is due to be discussed at an OPEC meeting on May 25.

"The oil rally has paused and whether it can resume depends on EIA inventory report," said Ole Hansen, head of commodity strategy at Saxo Bank.

"Having seen an initial short-covering rally, we now need OPEC and non-OPEC producers agreeing on the nine-month extension for the market to begin build up new long positions," Hansen said.

Jefferies bank said it was lowering its oil price forecasts due to a surprisingly strong rise in US production. It cut its Brent price estimate for the second half of 2017 to $59 per barrel from $61 previously.

North Sea oil output, generally seen in terminal decline, is expected to jump by a net 400,000 bpd in the next two years with new projects and greater efficiencies.