Oil up on Libya disruptions, but bloated U.S. market still weighs

Oil prices rose on Thursday, extending two days of increases as supply disruptions in Libya lifted the market, although bloated U.S. crude inventories curbed gains. Prices for front-month Brent crude futures (LCOc1), the international benchmark for oil, were at $52.53 per barrel at 0659 GMT, up 11 cents from their last close. In the United States, West Texas Intermediate (WTI) crude futures (CLc1) rose 17 cents to $49.67 a barrel. The increases extended two days of gains which supported Brent well above $50 a barrel and lifted WTI within sight of that level. Traders said supply disruptions in Libya were lifting the market and that falling U.S. gasoline inventories pointed to a tightening market there despite record crude stocks. "While crude stocks did build, the build was significantly lower than expected. Product stocks, on the other hand, drew a lot more than expected. This information, combined with the supply disruption in Libya was good enough to give the market cause to buy eagerly," said Sukrit Vijayakar, director of energy consultancy Trifecta. U.S. gasoline stocks fell 3.7 million barrels in the week ending March 24, compared with expectations for a 1.9-million barrel drop, the Energy Information Administration (EIA) said on Wednesday. U.S. crude inventories , however, rose 867,000 barrels to a record of nearly 534 million barrels. Key for the direction of oil prices will be whether an initiative led by the Organization of the Petroleum Exporting Countries (OPEC) to cut oil production during the first half of the year will be extended, and how high compliance with the reduction targets will be. OPEC, along with other producers including Russia, aims to cut output by almost 1.8 million bpd during the first half of the year. OPEC compliance with its targets is expected to be 95 percent this month, up from 94 percent in February, according to Reuters surveys. "This is extremely good for the cartel as it has helped them get a 10-15 percent increase in prices for 3 months now," Vijayakar said. However seems lower by non-OPEC members like Russia, who have officially agreed to participate in cutting. "Russia's 300,000 bpd cut commitment particularly has been called into question," Eurasia Group said this week in a research report. "It is highly unlikely Russia will achieve an absolute 300,000 bpd reduction during the tenure of the current agreement," it added. As markets remain bloated halfway into the curbs, there is a broad expectation that the supply cuts will be extended into the second half of the year.