Oil prices climbed on Thursday after sharp losses the session before, buoyed by strong compliance with touted international production cuts, although a surge in US crude inventories continued to drag.
The Organization of the Petroleum Exporting Countries (OPEC) and other oil producers had reached an agreement last year to cut output by almost 1.8 million barrels per day (bpd) in the first half of 2017, with investors paying close attention to levels of compliance with the landmark deal.
Kuwait's oil minister had said on Wednesday that OPEC's compliance with the cuts had exceeded targets, standing at 140 per cent in February, while non-OPEC members' compliance was 50-60 per cent.
International Brent crude futures were up 50 cents, or 0.94 per cent, at $53.61 per barrel at 0744 GMT. They ended the last session down 5 per cent at $53.11 a barrel, hit by a record build-up in US inventories.
US benchmark West Texas Intermediate (WTI) crude futures rose 37 cents or 0.74 per cent to $50.65 a barrel. WTI plummeted 5.38 per cent to $50.28 per barrel in the previous session, marking its lowest since December.
The rise in prices on Thursday could be short-lived, said Michael McCarthy, chief market strategist at Sydney's CMC Markets.
“One of the factors (pressuring prices) is the strengthening US dollar on US rate hike (expectations),” McCarthy said.
The US dollar index rose on the back of stronger-than-expected US jobs data and growing expectations that the Federal Reserve could raise US interest rates next week. A strong dollar makes dollar-denominated oil more expensive for importing countries.
Crude inventories in the United States, the world's top oil consumer, surged last week by 8.2 million barrels, handsomely beating forecasts of a 2 million barrel build.
“When combined with the huge speculative long positions in the market, it's not surprising that prices sold off so strongly,” ANZ said in a note.
“However, there is increasing talk of extending the OPEC production cut agreement.”
Kuwait is set to host a ministerial meeting on March 26, attended by both OPEC and non-OPEC members to review compliance with the crude production cuts.