Oil prices steady as market await U.S. data, extended output cut

By Devika Krishna Kumar

NEW YORK (Reuters) - Oil prices were little changed on Wednesday as investors awaited official data on inventories in the United States and the outcome from Vienna where ministers from OPEC and other exporting countries were discussing whether to extend production cuts.

Data from the U.S. Energy Information Administration is due to be released at 10:30 a.m. EDT (1430 GMT). Late Tuesday, data from industry group American Petroleum Institute showed crude inventories fell by 1.5 million barrels to 521.9 million barrels in the week to May 19, compared with analysts' expectations for a decrease of 2.4 million barrels. [API/S]

Benchmark Brent crude oil was up 11 cents a barrel at $54.26 at 9:47 a.m. EDT (1347 GMT). U.S. light crude was up 1 cent at $51.48.

Both benchmarks have gained more than 10 percent from their May lows below $50 a barrel, rebounding on a consensus that the Organization of the Petroleum Exporting Countries and other producers will maintain strict limits on oil production in an attempt to drain a global oversupply.

OPEC has promised to cut supplies by 1.8 million barrels per day (bpd) until June and was expected on Thursday to extend that cut as long as nine months.

A multination ministerial committee consisting of some key OPEC and non-OPEC members recommended on Wednesday keeping the cuts at the same level when oil producers meet the following day, an OPEC source said.

"A nine-month extension of the production cuts agreed six months ago is meanwhile regarded as a done deal," Commerzbank said in a note.

"After all, OPEC's target of bringing global stocks back to the five-year average level is still far from achieved."

The OPEC-led cuts would only result in a balanced market this year, BMI Research said, but from 2018 onward, markets would return to oversupply, albeit at a lower level than 2013-2016.

One reason why markets have not tightened more has been U.S. oil production, which has soared by 10 percent since mid-2016 to 9.3 million bpd.

Benefiting from a market structure known as contango, in which future oil prices are higher than those for immediate delivery, U.S. drillers have sold future production in order to finance expanding output.

To stop this, Goldman Sachs analysts have suggested the oil futures price curve should be pushed into backwardation, where forward prices are below current ones.

While backwardation might be able to reduce inventories, it is less clear how OPEC could alter the forward price curve, or if that would stop production rising.

From a technical perspective, oil has had a bullish run, analysts said.

"Brent's ability to reclaim the broken $49.90 support level two weeks ago was the first and key bullish trigger, which has since led to further technical follow-up buying ... the old resistance area between $52.00 and $52.70 is the key support zone to watch heading into and in the immediate aftermath of the OPEC meeting," aid Fawad Razaqzada, technical analyst for Forex.com.

(Additional reporting by Christopher Johnson in London, Henning Gloystein in Singapore; Editing by Jason Neely and Jeffrey Benkoe)