Oil prices settled down as much as 1% on Tuesday as investors took some profit after an early rally sparked by supply drops announced by Iraq and Saudi Arabia, ahead of an OPEC meeting later this week.
Oil headed for its largest third-quarter gain in 13 years as prices rose on Wednesday after the Iraqi oil minister said OPEC and its partners are considering extending or deepening output cuts aimed at reducing a global supply glut.
At $55.50 a barrel, Benchmark Brent crude was up 3 cents at 2:03 p.m. ET (1803 GMT), in an unstable session that made it stretch from a high of $55.75 a barrel to an intraday low of $54.86.
U.S. benchmark, West Texas Intermediate crude oil, which expires at the day's settlement, rose by 1.8 per cent, to $50.35 a barrel on the New York Mercantile Exchange, headed for its highest settlement since late May.
Crude oil prices have risen approximately 20 per cent since OPEC and Non-OPEC agreed a six-month production cut of 1.8 MBPD in 2016.
Hurricanes in the Gulf of Mexico have pushed up crude inventories as some USA refineries have been shut by flooding.
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Crude inventories rose for a third straight week, building by 4.6 million barrels. Still another group-including Ecuador and Iraq-think that it's more cuts that should be discussed, Iraqi Oil Minister Jabbar al-Luiebi said on Tuesday.
Oil production also improved significantly to 9.51 million barrels per day, which reduced to 8.78 million bpd after it was affected by storm Harvey that hit the US Gulf Coast.
Gasoline stocks fell 2.1 million barrels, in line with analysts' expectations while distillate stocks inventories fell 5.7 million barrels, the biggest weekly draw since November 2011. However, the recovery in U.S. oil production after Hurricane Harvey will remain the dominant bearish factor capping price gains. On Friday, data from energy services company Baker Hughes showed domestic oil drillers running the lowest number of rigs since June. The profitability line in shale oil production in United States reduced to $45-50 a barrel in recent days, while it was $60 in previous years.
Some market participants think the amount of crude swirling in the market in the aftermath of Hurricane Harvey was being underestimated, and prices could come under more pressure. "The report shows that we're recovering from the hurricane", Rob Haworth, who helps oversee $142 billion at U.S. Bank Wealth Management in Seattle, said by telephone.
The International Energy Agency in its latest monthly report said commercial OECD oil stocks stayed flat in July, month-on-month, at 30.016 million barrels, about a 190 million barrels above Organization of the Petroleum Exporting Countries' target of the last five year average.
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