Oil prices firmed on Wednesday to hold near eight-week highs hit in the previous session, on expectations of a drawdown in U.S. stocks and as a rise in shale oil production shows signs of slowing.
Brent crude futures had risen 36 cents, or 0.7 percent, to $50.56 a barrel by 0332 GMT, after rallying more than 3 percent on Tuesday.
U.S. West Texas Intermediate futures climbed 46 cents, or 1 percent, to $48.35 a barrel.
U.S. crude stocks fell sharply last week as refineries boosted output, while gasoline inventories increased and distillate stocks decreased, data from industry group the American Petroleum Institute showed on Tuesday.
Crude inventories declined by 10.2 million barrels in the week ending July 21 to 487 million, compared with expectations for a decrease of 2.6 million barrels.
The market has been buoyed by Saudi Arabia’s announcement at a meeting of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers on Monday that it would limit crude exports to 6.6 million barrels per day (bpd) in August, down nearly one million bpd from a year earlier. “This has seen expectations of further drawdown in inventories increase,” ANZ said in a research note, referring to the Saudi plans.
Nigeria also agreed to join a push to rein in production by capping or cutting its output from 1.8 million bpd once it stabilizes at that level.
However, the current uptrend in oil prices could be limited to the low $50 per barrel region, according to Ric Spooner, chief market analyst at CMC Markets in Sydney.
“As we approach $50 and into the low $50s, that’s a level that could attract increased U.S. shale oil production if it stays around that level,” he said.
On Monday, Anadarko Petroleum said it would cut its 2017 capital budget by $300 million because of depressed oil prices, the first major U.S. oil producer to do so, after posting a larger-than-expected quarterly loss.
Oil prices have come under pressure from an oversupply of crude around the globe, brought on in part by rising production from U.S. shale regions.
Indonesia’s energy minister said on Tuesday that Southeast Asia’s top crude producer would be open to rejoining the Organisation of the Petroleum Exporting Countries (OPEC) as long as it is not forced to curb its own crude oil production.