By Sabina Zawadzki
LONDON (Reuters) - A severe disruption to Libyan oil supplies and comments from officials suggesting OPEC could extend its production cuts deal to the end of the year boosted oil prices on Tuesday.
But prices were still weighed on by a resurgence in U.S. oil production and the expectation that inventories there would build up once again, illustrating the persistent global supply overhang that has depressed prices for three years.
Prices for front-month Brent crude futures, the international market benchmark, gained 55 cents to $51.30 per barrel by 1315 GMT. West Texas Intermediate (WTI)futures, the U.S. benchmark, were up 50 cents at $48.23 a barrel.
Brent rebounded from testing a support of $50 a barrel on Monday and was underpinned by a weak dollar, which can attract investors to safer commodity markets while making oil cheaper for countries using other currencies.
Both Brent and WTI jumped by over 20 cents a barrel after a local industry source said Libya's oil output had fallen by roughly a third, or 252,000 barrels per day (bpd) because of production blockage at the Sharara and Wafa oil fields.
More From This Section
"A number of bullish developments are helping oil regain some poise this morning, chief among which is the latest disruption in Libya," PVM analysts said in a report.
"A further tailwind for prices was provided by comments from the Iranian oil minister in which he hinted that an extension to OPEC-led cuts is likely."
The comments from Iranian Oil Minister Bijan Zanganeh were followed by a statement from non-OPEC member Azerbaijan that said it was ready to join an extension of the deal into the second half of this year.
Nevertheless, Saxo Bank Head of Commodity Strategy Ole Hansen said supply remained in focus ahead of the U.S. Energy Information Administration oil stocks report, "where an increase of more than 322,000 barrels will see Cushing hit a record".
Rising stocks at Cushing tend to depress the U.S. benchmark price, widening its discount to Brent, which in turn makes U.S. crude oil attractive to importers. That undermines any OPEC efforts to cut supplies.
Analysts polled by Reuters expect U.S. crude oil stocks to have risen by 1.2 million barrels to a fresh record [EIA/S]. EIA data is due on Wednesday at 1430 GMT while estimates from the American Petroleum Institute are issued on Tuesday at 2030 GMT.
A record amount of U.S. crude has found its way to Asia and other destinations this year and more is expected to be shipped out as traders take advantage of arbitrage opportunities by sending excess U.S. oil into regions where it can find buyers.
(Additional reporting by Henning Gloystein in Singapore; Editing by Susan Thomas, Greg Mahlich)