Oil prices rose as much as 2 per cent on Wednesday after an Iraqi delegate said that some form of deal would be reached between OPEC members who are meeting in Vienna to agree terms of a production cut to rein in oversupply.
International Brent crude was trading at $47.18 per barrel at 0707 GMT, up 80 cents, or 1.72 per cent, from its last close. It rose over $1, or 2 per cent, slightly earlier.
US West Texas Intermediate (WTI) crude was up 71 cents, or 1.57 per cent, at $45.94 a barrel.
The Organization of the Petroleum Exporting Countries (OPEC) is due to meet at 0900 GMT on Wednesday in its headquarters in Austria to discuss the terms of a potential deal to cut production in an effort to prop up prices that have more than halved since 2014 due to oversupply.
An Iraqi delegate said on Wednesday that some form of agreement would be reached, and Iran's oil minister also said he was optimistic.
Traders said markets were jittery, and that prices could sharply swing either way depending on developments at the meeting in Vienna.
Oil dropped nearly 4 per cent in the previous session over disputes between Saudi Arabia, Iran and Iraq regarding details of the planned cut.
Most analysts expect some form of deal from the meeting.
"We expect OPEC will reach an agreement ... We believe OPEC's resolve in reaching an agreement remains strong," ANZ bank said.
Analysts at Goldman Sachs, Barclays, and ANZ agree that oil prices would quickly rise above $50 per barrel should OPEC come to an agreement. Without a deal, the consensus is for a fall to the low $40s.
Iran and Iraq are resisting pressure from Saudi Arabia to curtail production, making it hard for the group to reach a deal.
OPEC, which accounts for a third of global oil production, made a preliminary agreement in Algiers in September to cap the output around 32.5-33 million bpd versus the current 33.64 million bpd to prop up prices.
One of the biggest OPEC concerns is that by cutting output it would simply hand over market share to non-OPEC competition.
There are strong indicators that such concerns are warranted: US shale drillers have radically slashed production costs in the last few years, to now between $35 and $40 per barrel.
A potential compromise would be for OPEC to return to some form of production quota, instead of ordering outright cuts.
Although that would do nothing to end a glut in which more crude is produced than consumed, it would potentially help balance the market in the long-term as rising demand would gradually bring consumption to output levels.