By Osamu Tsukimori
TOKYO (Reuters) – Oil prices erased early losses to trade higher on Wednesday partly due to a weaker dollar, but gains were limited as market participants remained sceptical producers would reach an agreement to freeze output to rein in a global supply glut.
London Brent crude for November delivery <LCOc1> was up 23 cents at $47.49 a barrel by 0643 GMT, after settling down 37 cents on Tuesday.
NYMEX crude for October delivery <CLc1> was up 22 cents at $45.05.
Trade sources said oil was supported from the dollar’s decline following downbeat U.S. economic data, making greenback-denominated crude less expensive for holders of other currencies. [USD/]
Oil prices hit a one-week high on Monday after Russia and Saudi Arabia agreed to cooperate on stabilising the oil market, but they have since fallen due to mounting uncertainty over a deal.
The Organization of the Petroleum Exporting Countries and non-OPEC producers such as Russia are expected to discuss an output freeze at informal talks in Algeria on Sept. 26-28.
“Even if there were no output deal at the informal talks, oil may not fall and could stay around $45 (a barrel) as shale oil production is not growing,” said Tetsu Emori, president of Emori Capital Management in Tokyo.
Iran has said it would only cooperate on the freeze if fellow exporters recognised its right to fully regain market share to pre-sanction levels.
Analysts at Citi warned that Iranian involvement would be a key hurdle for an OPEC decision and added it was unlikely that any viable agreement would impact physical market balances.
Traders said U.S. crude was supported by Genscape data showing a draw of some 700,000 barrels last week at the Cushing, Oklahoma, delivery hub for U.S. crude futures.
U.S. commercial crude inventories likely dropped by 100,000 barrels last week after rising for two straight weeks, a preliminary Reuters poll showed on Tuesday. [EIA/S]
Gasoline stocks likely fell by 500,000 barrels, while distillate stocks are forecast to have increased by 1 million barrels, the poll showed.
The American Petroleum Institute is set to release its weekly oil data on Wednesday, delayed a day from usual due to a long weekend.
(Reporting by Osamu Tsukimori; Editing by Joseph Radford and Biju Dwarakanath)