Oil prices inched up on Tuesday as rising Russian output and expectations of a reduction in Saudi Arabian crude prices were offset by a potential slowdown in U.S. production.
U.S. West Texas Intermediate crude futures were at $63.13 a barrel at 0434 GMT, up 11 cents from their previous settlement.
Brent crude futures rose to $67.80 per barrel, up 16 cents after falling by 2.5 percent on Monday.
Greg McKenna, chief market strategist at futures brokerage AxiTrader, said traders were wary of the fact that the market was still holding large amounts of long positions which will need to be sold off at some stage.
“That makes prices vulnerable to bad news,” he said, pointing to rising Russian production and the likely drop in Saudi physical crude prices.
Hedge funds and other speculators raised their net long positions in WTI futures and options in the week to March 27, the U.S. Commodity Futures Trading Commission said on Friday. That was the second consecutive increase and the amount of contracts held is close to the record reached in January.
Brent reached a 2018 high of $71.28 a barrel in January but has since struggled to pass that level. Two rallies last week ran out of steam just above $71.
There was also pressure coming from the physical market, where top exporter Saudi Arabia is expected to cut prices for all the crude grades it sells to Asia in May.
This came amid rising supplies. Top producer Russia pumped 10.97 million barrels per day (bpd) of crude in March, up from 10.95 million bpd in February, official data showed, an 11-month high.
Saudi Arabia and Russia have led ongoing efforts by the Organization of the Petroleum Exporting Countries (OPEC) and other major producers outside of OPEC to cut back output to support prices.
One of the key price drivers going forward will be fuel inventories and crude output from the United States, which has risen by almost a quarter since mid-2016 to 10.43 million bpd, overtaking Saudi Arabia and coming in just shy of Russia.
The American Petroleum Institute (API) is due to publish fuel inventory data later on Tuesday.
“We expect for a gentle dip in prices today amidst bearish reports from the American Petroleum Institute (API),” Singapore-based Phillip Futures said.
Crude oil inventories are forecast to rise for a second week, gaining by 1.7 million barrels in the week to March 30, according to a Reuters poll on Monday.
Weekly production and inventory data by the Energy Information Administration (EIA) is due to be published on Wednesday.
“Production data released on Wednesday will offer a fresher clue on which direction prices are going,” Ma Kun, general manager of Energy and Chemicals at Bank of China International Futures said.