By Edmund Blair
LONDON (Reuters) - Oil prices rose on Tuesday, helped by expectations that an OPEC-led output cut would be extended beyond June but gains were pegged back by concerns about persistently high crude inventories.
The Organization of the Petroleum Exporting Countries and some non-OPEC producers agreed to curb production from Jan. 1 by 1.8 million barrels per day (bpd) for six months to drain crude from record stockpiles. But inventories remain stubbornly large.
OPEC sources have indicated the group's members increasingly favour an extension but want the backing of non-OPEC oil producers, which have yet to deliver fully on existing reductions.
"Talk of the extension is supporting prices, together with the weaker dollar," said Tamas Varga, analyst at London broker PVM Oil Associates. "But any rally might run out of steam soon as the underlying sentiment is still negative."
A weaker dollar makes dollar-denominated crude cheaper for holders of other currencies.
Brent crude, the international benchmark for oil, was up 36 cents at $51.98 per barrel at 1118 GMT, rebounding from last week's three-month low of $50.25 but well below January's surge above $58 in the wake of the output cuts.
U.S. West Texas Intermediate (WTI) crude rose 31 cents to $48.53.
Further gains may depend on Tuesday's data on U.S. inventories from the American Petroleum Institute (API) at 2030 GMT.
Last week's report by the API industry group showed a surprise fall in overall stockpiles in the week to March 10. This time analysts expect a rise back towards record highs.
Stockpiles at the Cushing, Oklahoma delivery hub for WTI may be a particular focus in the API data.
Stocks at Cushing rose in the week to March 10, helping to widen the premium for Brent over WTI. The gap now stands at around $2.70 for May delivery.
"Another increase would be generally bearish for WTI-related spreads," Varga said.
"The combination of robust demand and weaker global supply leading to rebalanced markets will not be derailed by U.S. shale oil," said Jeremy Baker, senior commodity strategist at Vontobel Asset Management.
He said growth in demand for crude in 2017 was expected to rise faster than the long-term average of 1.2 million bpd.
(Additional reporting by Henning Gloystein in Singapore; Editing by Dale Hudson)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)