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Oil prices rise as US producers struggle, focus shifts to inventory
[SINGAPORE] Oil prices rose early on Wednesday after falling in the previous session, with US producers showing increasing signs of financial distress and as focus shifted to US inventory data due later in the day.
US West Texas Intermediate (WTI) crude futures were trading at US$36.94 per barrel at 0117 GMT, up 60 cents from their last settlement.
International benchmark Brent futures were up 40 cents at US$39.14 a barrel.
The climbs came after crude prices dropped around 2 per cent the previous session.
Preliminary inventory data from industry group American Petroleum Institute (API) showed late on Tuesday that US crude stockpiles rose 1.5 million barrels last week, but by less than half of what was expected by an analyst poll, lending markets some support.
The US government's Energy Information Administration (EIA) will issue official inventory figures, which have hit consecutive records over the past weeks, later on Wednesday.
"The focus on US oil inventory will be even greater this week after some strong gains recently. Another build amid signs of weakness in gasoline demand could see prices under further pressure," ANZ bank said on Wednesday.
Traders said that the prospect of falling US oil output was also supporting markets.
US shale producer Linn Energy said on Tuesday that bankruptcy may be unavoidable as the company missed interest payments amid a slump in oil prices.
Other companies, fighting for survival as banks cut loans, are seeking a costly alternative by borrowing from private equity firms at hefty interest rates.
Despite Wednesday's price rises, oil markets remain dogged by a global supply overhang which sees over 1 million barrels of crude pumped every day in excess of demand, leaving storage tanks around the world brimming with unsold oil.
And there are few signs of changing fundamentals. While major producers like Saudi Arabia and Russia have proposed to freeze their output at January volumes, near record levels of over 10 million barrels per day (bpd) each, others are refusing to cooperate.
Iran, freed from international sanctions which halved its production to little more than 1 million bpd, has tripled its output to over 3 million bpd since January.
"Any such deal (to freeze output) would still not be a game changer. It would really just maintain the excess supply that is now in place," Thomas Pugh of Capital Economics said in a note.