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Crude prices rose in Asia today, extending last week's gains from data showing a drop in US production, while traders look ahead to an upcoming meeting of oil majors they hope will lead to limits on output.
Data showing US stockpiles and output had seen a surprise fall provided some much needed impetus to the market last week, with a fall in the number of rigs drilling also provided strong support.
Dealers are keenly awaiting the next stockpiles report due Wednesday hoping for a further fall, which would indicate a pick-up in demand.
But the key focus is on the April 17 meeting in Doha, where most of the world's top producers led by Russia and Saudi Arabia will discuss a global glut that helped send prices plunge by three quarters between August 2014 and February this year.
At around 0950 IST today, US benchmark West Texas Intermediate for May delivery was up 13 cents, or 0.33%, at $39.85 and Brent crude for June was 15 cents, or 0.36%, higher at $42.09.
Both contracts rose 8% or more last week week.
"This coming Wednesday is very critical as we will monitoring whether or not these falling (US) inventories are a one-time thing or a trend," said Margaret Yang, an analyst with CMC Markets in Singapore.
"If inventory data falls, it will be a strong support for prices to rise," she said.
However, while there is a growing expectation the Doha meeting will see signatories agree to a production freeze at January 2016 levels, analysts were sceptical of the long-term impact of such a deal.
Yang said that a production cut, not a freeze, would be more effective in boosting oil prices.
"Currently, production of those countries are at historical highs. Even though they can come up with a consensus to freeze the production at current levels, it doesn't help," she said.
"If they can come up with a conclusion to reduce production, that would be more meaningful," she added.
