Oil rose towards $52 a barrel on Wednesday, hitting its highest since June, supported by an industry report that U.S. inventories probably fell for a fifth straight week and OPEC's deal to cut supply.
The American Petroleum Institute 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 data on Wednesday.
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. Analysts expect a rise in crude stocks of 2.6 million barrels.
"If the (EIA) can confirm the API statistics and help crude oil break away from the resistance of the high of August, then crude oil will have to start targeting the high of June," said Olivier Jakob, analyst at Petromatrix.
Jeffrey Halley, senior market analyst at brokerage OANDA in Singapore, said another confirmed drawdown in crude stocks would likely push U.S. crude 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 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.
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. ■