Oil prices climb further on Iran support for oil output cap

By Keith Wallis

SINGAPORE (Reuters) - Oil crude futures rose in early Asian trade on Thursday after Iran welcomed plans by Russia and Saudi Arabia to cap crude oil production at January levels, extending steep gains in the previous session.

Brent futures added 32 cents to $34.82 a barrel by 0144 GMT, after surging 7.2 percent in the previous session to close up $2.32.

U.S. crude rose 50 cents to $31.16 a barrel, having surged 5.6 percent in the previous session.

But commentators suggested markets may have overreacted to Iran's support for caps on crude production and it was unlikely moves to limit production would lead to cuts in oil output.

"I share the consensus view that producers' are unlikely to reach an agreement (on cuts), the rationale being the need to satisfy two conditions," said Ric Spooner, chief market analyst with Sydney's CMC Markets.

"First, any price gains must offset losses achieved from volume cuts - production cuts must be meaningful - sufficiently large to achieve a substantial price increase. And they will have to involve everybody - all the major (producer) players. That will be difficult to achieve," Spooner said.

Oil prices would likely remain volatile, he added, as traders and investors reacted to news and rumours about curbs on output growth and possible cuts in production.

Iranian Oil Minister Bijan Zanganeh met counterparts from Venezuela, Iraq and Qatar in Tehran on Wednesday but did not say if Iran would cap output at January's levels in keeping with moves by major producers Russia, Saudi Arabia and Iraq to limit production.

Iran's OPEC envoy Mehdi Asali said it was "illogical" to ask Iran to freeze production levels in comments to the Shargh daily newspaper before the talks on Wednesday.

Iran exported around 2.5 million barrels per day (bpd) of crude before 2012, but sanctions, imposed by world powers to curb Tehran's nuclear programme, cut production to about 1.1 million bpd.

The sanctions were lifted last month, allowing Iran to resume selling oil freely in international markets.

Oil prices also gained support after U.S. crude stocks unexpectedly fell by 3.3 million barrels last week to 499.1 million, data from industry group the American Petroleum Institute showed on Wednesday.

Analysts had expected crude inventories to climb by 3.9 million barrels to 505.9 million barrels in the week to Feb. 12, according to a Reuters poll on Tuesday.

Oil prices may gain further direction when the Department of Energy's Energy Information Administration releases official oil inventory data later on Thursday.

(Reporting by Keith Wallis; Editing by Richard Pullin)