By Henning Gloystein
SINGAPORE (Reuters) – Oil prices on Wednesday extended gains from the previous session, lifted by supply disruptions in Libya and expectations that an OPEC-led output reduction will be extended into the second half of the year.
Front-month Brent crude futures <LCOc1>, the international benchmark for oil, rose 29 cents, or 0.6 percent, to $51.62 per barrel by 0653 GMT.
In the United States, West Texas Intermediate (WTI) crude futures <CLc1> were up 34 cents, or 0.7 percent, at $48.71 a barrel.
The gains added to a rise of more than 1 percent for both crude benchmarks the previous day.
Oil production from the western Libyan fields of Sharara and Wafa has been blocked by armed protesters, reducing output by 252,000 barrels per day (bpd), a source at the National Oil Corporation (NOC) told Reuters late on Tuesday.
“That (Libya), along with the Iranian oil minister saying there is likely to be an extension to the production cut deal helped crude oil rally overnight,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
The Organization of the Petroleum Exporting Countries (OPEC), along with some other producers including Russia, have agreed to cut production by almost 1.8 million bpd during the first half of the year in order to rein in a global fuel supply overhang and prop up prices.
But as markets remain bloated halfway into the cuts, there is a broad expectation that the supply cuts will be extended into the second half of the year.
Despite the rising consensus of extended cuts, the OPEC-led strategy to re-balance oil markets is not without controversy.
As OPEC and especially Saudi Arabia cut their production, other producers not participating in the cuts have been quick to fill the supply gap and gain market share.
In the United States in particular, shale oil drillers have seized the opportunity to ramp up output and exports.
As a result, China became the third biggest overseas destination for U.S. crude oil in 2016, according to data from the Energy Information Administration (EIA), up from ninth position the previous year.
“In 2016, U.S. crude oil exports averaged 520,000 bpd, 12 percent above the 2015 level, despite a year-over-year decline in domestic crude oil production,” the EIA said.
With U.S. oil production rising sharply again this year <C-OUT-T-EIA>, and inventories brimming, traders expect American exports to surge further in 2017.
“The market can expect another build on crude (inventories) when EIA release their figures later,” said Matt Stanley, a fuel broker at Freight Investor Services (FIS) in Dubai.
The EIA is due to publish official U.S. crude and fuel product data later on Wednesday.
(Reporting by Henning Gloystein; Editing by Richard Pullin)