By Alison Sider and Neanda Salvaterra 

Crude-oil prices rose Tuesday as conflict in Libya interrupted oil production there, providing some relief to investors worried about an oversupply of crude.

U.S. crude futures rose 64 cents, or 1.34%, to $48.37 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, gained 58 cents, or 1.14%, to $51.33 a barrel on London's ICE Futures Exchange.

Prices rose after Libyan officials said Tuesday that a militia has shut key pipelines connected to oil fields there, choking off some 250,000 barrels of oil a day amid a dispute over wage arrears.

The supply disruption comes as investors are weighing whether production cuts by the Organization of the Petroleum Exporting Countries and 11 outside suppliers are helping shrink the oil glut that has weighed on prices. Libya was exempt from the cuts, and its output had returned to about 700,000 barrels a day -- partly offsetting cutbacks by other producers.

Oil prices have faced selling pressure lately as rising crude production in the U.S. threatens to frustrate a continuing effort to reduce global stockpiles.

"I think we're just in a new trading range," said Tariq Zahir, managing member of Tyche Capital Partners. "If it wasn't for Libya we wouldn't be up at these prices now."

Data show U.S. production has remained above 9 million barrels a day for the past four weeks, and the number of drilling rigs at work has steadily risen this year, reaching its highest level since September 2015.

"We now forecast U.S. crude-oil production to reach a multidecade high by December, within sight of the all-time high reached in 1970," said Barclays analysts in a recent note.

But investors haven't abandoned all hope that OPEC's cuts will be successful.

Data from ICE showed that traders are largely holding on to their record-high speculative position that Brent prices will rise. According to ICE figures, speculative net long positions in Brent declined 8,200 to 397,700 contracts in the week to March 21.

"We've been working steadily higher since the middle of last night," said John Saucer, vice president of research and analysis at Mobius Risk Group. While crude prices ended Monday lower, they settled at the upper end of the day's range -- a signal to would-be buyers.

Still, Mr. Saucer said the prices may face resistance on their way back up, as U.S. producers take advantage of any rally to lock in higher prices for their output by selling futures.

"This market will have some work to do to locate support to move back above $50," he said.

Some analysts said OPEC is at risk of failing to make a dent in global inventories unless the cartel decides to extend its cuts into the second half of 2017 at its meeting May 25.

Analysts and traders surveyed by The Wall Street Journal forecast that U.S. crude stockpiles rose by 1 million barrels last week. But they expect gasoline and distillates stocks to show drawdowns of 1.9 million barrels and 1 million barrels, respectively. The anticipated declines in refined product inventories have helped boost crude prices, analysts said. Official figures, including production rate, will be released on Wednesday by the U.S. Energy Information Administration.

The American Petroleum Institute, an industry group, said late Tuesday that its own data for the week showed a 1.9 million-barrel rise in crude supplies, a 1.1-million-barrel decrease in gasoline stocks and a 2-million-barrel fall in distillate inventories, according to a market participant.

Gasoline futures rose 1.6 cents, or 0.99%, to $1.6349 a gallon. Diesel futures rose 1.42 cents, or 0.95%, to $1.5167 a gallon.

Benoit Faucon and Jenny W. Hsu contributed to this article

Write to Alison Sider at alison.sider@wsj.com and Neanda Salvaterra at neanda.salvaterra@wsj.com

 

(END) Dow Jones Newswires

March 28, 2017 17:12 ET (21:12 GMT)

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