Crude oil prices bounced back as decline in U.S. inventories underpinned the market, although a dip in compliance with OPEC efforts to reduce output and near record supplies capped gains.
The benchmark for global oil market, Brent futures gained 56 cents, or 1.1 percent to $51.02 a barrel. WTi crude rose 48 cents, or 1 percent, to $48.14 a barrel.
Previously, WTI slid 2.4 percent to its lowest close since March 21 and Brent closed at its lowest level this year, erasing all of the gains made since OPEC agreed to reduce production in November.
There is precautionary buying following API data and leading to EIA data tonight. The lower oil gets, there is potential for forming a base. We are near lows made in March both in Brent and West Texas and if we do see, as many expect, a good run of draw in inventories into the summer, I think there is some upside potential.
U.S. crude stocks fell last week, and both gasoline and distillate inventories also dropped, data from industry group the American Petroleum Institute (API) showed on Tuesday.
Crude inventories fell by 4.2 million barrels in the week ended April 28 to 528.3 million barrels, compared with analyst expectations for a decrease of 2.3 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub fell by 215,000 barrels, API said.
The U.S. government will release its Energy Information Administration (EIA) inventory data on Wednesday. The supply of crude oil continues to decline. This is evident in both spot and forward supply data.
Demand remains strong and in spite of lower refinery profitability we see increasing capacity utilization rates.
Production from the Organization of the Petroleum Exporting Countries (OPEC) fell for a fourth straight month in April, a Reuters survey found on Tuesday, as top exporter Saudi Arabia kept production below its target while maintenance and unrest cut production in exempt nations Nigeria and Libya.
Crude oil discharged on ships worldwide in April was near a record high of 45 million barrels per day. This indicates supplies remain high, but it also implies strong demand, especially from Asia.
While OPEC countries are cutting production, exports of U.S crude oil to Asia have spiked.