Oil Prices Edge Up Ahead of U.S. Stockpile Data

Crude oil prices edged higher Wednesday, with gains capped by concerns that U.S. production was undermining the Organization of the Petroleum Exporting Countries' efforts to rebalance the market.

Brent crude, the global oil benchmark, rose 0.4% to $51.86 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.2% at $48.73 a barrel.

U.S. stockpile and production data were due Wednesday from the Energy Information Administration. Crude stockpiles likely rose by 882,000 barrels in the week ended May 12, according to the American Petroleum Institute. However, The Wall Street Journal's survey of 13 analysts suggests a decrease of 2.2 million barrels.

Investors are pulled between news that OPEC and non-cartel producers are poised to cut more of their production and expectations of accelerating oil output from the U.S. and other countries. On Monday, Saudi Arabia and Russia said the OPEC deal should be extended for nine months.

"The extension of supply cuts, combined with the seasonal swing of global oil demand between the second quarter and the third quarter of some 1 million barrels a day, should prompt a decline in OECD inventories that should garner momentum during the summer," said Harry Tchilinguirian head of commodity strategy at BNP Paribas SA.

Skepticism on the effectiveness of production cut deals resurfaced Tuesday after the International Energy Agency said commercial oil inventories in developed nations grew by 24.1 million barrels in the first quarter. The agency's preliminary findings suggested stocks increased further in April.

Even if OPEC extends its cuts, "stocks at the end of 2017 might not have fallen to the five-year average, suggesting that much work remains to be done in the second half of 2017 to drain them further," the IEA said.

For OPEC to bring global inventories back to the five-year average, the cartel will need to drain its supplies by 1 million barrels a day over the next 10 months, said Bernstein Research, saying the extension into 2018 of the 1.8-million barrel-a-day cuts was necessary and logical.

But a potential drawback is how the market will cope with the extra supply when the deal ends, said Vivek Dhar, a commodities strategist at Commonwealth Bank of Australia.

"The risk is that oil markets return to oversupply if members resume production to pre-deal levels quickly," he said.

Nymex reformulated gasoline blendstock--the benchmark gasoline contract--rose 0.1% to $1.61 a gallon Wednesday. ICE gasoil changed hands at $458.00 a metric ton, unchanged from the previous settlement.