LONDON/TOKYO (Oct 25): Oil steadied on Wednesday near a four-week high after top exporter Saudi Arabia said it was determined to end a supply glut that has weighed on the market for three years.
Brent crude futures were up 6 cents at US$58.39 a barrel by 1337 GMT, having closed up 96 cents or 1.7% on Tuesday. U.S. West Texas Intermediate crude was down 20 cents at US$52.27.
Saudi Arabian Energy Minister Khalid al-Falih said on Tuesday the kingdom was determined to reduce oil inventories stocks in industrialised countries to their five-year average and raised the prospect of prolonged output restraint once an OPEC-led pact to cut supplies ends.
There is evidence that global inventory levels are falling and demand is strong, but the price has struggled to break above US$60 a barrel, partly due to uncertainty about what will happen to crude supplies after March 2018, when the output reduction deal is due to end.
"We've got a two-way battle here and at this stage, the bulls are having it," Saxo Bank senior manager Ole Hansen said.
"We are in much better shape than we have been for a long time. The million dollar question is — is the market ready and prepared for a go at key resistance above US$60? I still feel that is a step too far," he said.
The Organization of the Petroleum Exporting Countries, Russia and other producers have cut oil output by about 1.8 million barrels per day (bpd) since January. Their pact runs to March 2018, but they are considering extending it.
Data from the American Petroleum Institute on Tuesday showed U.S. crude stocks rose by 519,000 barrels last week, compared with analysts' expectations for a decline of 2.6 million barrels.
Gasoline inventories fell by 5.8 million barrels, compared with analysts' expectations for a 17,000 barrel decline.
The U.S. Energy Information Administration will release government inventory data on Wednesday.
"The up-trend (in the oil price) is pausing for breath, but a return to resistance-testing mode is on the cards," PVM Oil Associates strategist Stephen Brennock said in a note.
"Moves and closes above key resistances are needed in order to green light targets higher. These are on WTI at US$52.57/68; Brent US$58.37."
Disruptions to exports from Iraq, OPEC's second-largest producer, amid tensions between Baghdad and autonomous Iraqi Kurdistan have supported oil prices. Kurdish authorities on Wednesday offered to suspend their independence drive.