Oil prices recovered some lost ground on Monday after big losses last week, driven by expectations that OPEC will extend output cuts till the end of 2017, although a relentless rise in U.S. drilling capped gains.
Brent crude futures rose 54 cents by 0920 GMT to $52.50 per barrel.
U.S. West Texas Intermediate (WTI) crude oil futures added 49 cents to reach $50.11 a barrel.
Oil prices fell steeply last week on the back of stubbornly high crude supplies, despite a pledge by the Organization of the Petroleum Exporting Countries (OPEC) and some other producers to cut production by almost 1.8 million barrels per day (bpd) for six months from Jan. 1 to support the market.
But prices on Monday received a respite after a panel of OPEC and other allied producers recommended an extension of cuts by another six months from June, a source said.
“This no longer comes as any surprise, given that the influential Arab Gulf neighbouring states had last week already expressed support for an extension to the agreed cuts,” Commerzbank said in a note.
Leading Gulf oil exporters Saudi Arabia and Kuwait gave a clear signal at a conference in Abu Dhabi last week that OPEC planned to extend the supply reduction deal.
An expected fall in Iranian production also lent markets some support on Monday, traders said.
Iran’s crude oil exports are set to hit a 14-month low in May, suggesting the country is struggling to raise exports after clearing out stocks stored on tankers.
Iranian oil exports, especially to its core markets in Asia, had soared since sanctions were eased in January 2016.
But evidence of rising drilling activity in the United States tempered the bullish sentiment.
U.S. drillers added oil rigs for a 14th week in a row, to 688 rigs, extending an 11-month recovery that is expected to boost U.S. shale production in May by the biggest monthly increase in more than two years.
“Since its trough on May 27, 2016, producers have added 372 oil rigs (+118 percent) in the U.S.,” Goldman Sachs said in a note following the release of the data.
U.S. crude production is at 9.25 million bpd <C-OUT-T-EIA>, up almost 10 percent since mid-2016 and approaching that of OPEC’s top exporter Saudi Arabia.