Oil steadies ahead of U.S. inventory data; Brent below $50

By Barani Krishnan

NEW YORK (Reuters) - Oil prices steadied on Wednesday, pausing from the 2016 highs hit in the previous session, as investors awaited government data on U.S. crude stockpiles that analysts said may be crucial in determining whether a two-day rally is extended.

The market is expecting U.S. crude inventories to have fallen by 2.8 million barrels last week, for a second straight week of declines.

However, the American Petroleum Institute (API), an industry group, thinks the drop may have been only 1.14 million barrels last week. The U.S. Energy Information Administration (EIA) will issue official inventory data at 10:30 a.m. EDT (1430 GMT) [EIA/S] [API/S]

"Historically, the API data has been out of sync with the more widely followed EIA," said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

"How far the rally will evolve from current levels remains the main question floating around the media airwaves with a variety of views."

The front-month in U.S. crude's West Texas Intermediate (WTI) futures rose 20 cents to $48.52 a barrel by 10:00 a.m. EDT (1400 GMT). It hit a post-settlement high of $48.76 on Tuesday - its highest since mid-October.

Brent crude futures' front-month was up 5 cents at $49.33 a barrel. It reached $49.75 in Tuesday's after-hours trade, its highest since mid-October.

The rally came on the expectations for lower U.S. crude stockpiles, a new wildfire threat on Canadian oil supplies and intensified worries about crude supply outages in Libya and Nigeria.

"Ultimately, the fact that the market now struggles to pass the $50 level suggests that people are cautious and still wonder about the Q4'16/H1 2017 balance," said analysts at Vienna-based JBC Energy.

JCB forecast a current oversupply of about 800,000 barrels per day. Still, this was lower than previous glut levels, estimated by analysts at 1.5-2.0 million bpd, and JCB said persistent outages could bring the market closer to rebalancing.

Data from Iran shows oil exports from there are also recovering faster than analysts had expected. The OPEC member country's crude shipments are set to surge in May to 2.1 million bpd, nearly 60 percent above their level a year ago, with European shipments recovering to about half of their pre-sanctions levels, according to a source with knowledge of the country's crude lifting plans.

(Additional reporting by Ahmad Ghaddar in LONDON and Henning Gloystein in SINGAPORE; Editing by Jason Neely, Susan Thomas and Frances Kerry)