Oil up on Russia-OPEC hopes; U.S. rig count jump limits gains

By Ethan Lou

NEW YORK (Reuters) - Oil settled up on Friday on hopes Russia and OPEC will reach agreement at the weekend on market support initiatives to keep crude above $50 a barrel, although traders cautioned about pressure from a double-digit rise in the U.S. oil rig count.

Russian Energy Minister Alexander Novak said he would make proposals to his counterpart from OPEC leader Saudi Arabia this weekend on price-supportive measures that could include an oil production freeze.

Some traders were sceptical about Russia's commitment after Novak also said the country might produce up to 11 million barrels per day next year to hit a new post-Soviet record. OPEC, led by Saudi Arabia, has also been pumping crude at or near record levels.

"Market bulls are counting on Russia's credibility to seal a deal with OPEC to take prices to new levels above $50," said Phil Flynn, analyst at the Price Futures Group in Chicago.

Also pressuring the market, oil services firm Baker Hughes reported that U.S. oil rigs rose by 11 this week, the first double-digit growth since August.

Brent settled up 40 cents, or 0.8 percent, at $51.78. For the week, it ended flat.

U.S. West Texas Intermediate crude settled up 22 cents, or 0.4 percent, at $50.85 a barrel. WTI hit a July 2015 high of $51.93 on Wednesday and ended the week 1 percent higher.

Oil prices, which in February hit 12-year lows of around $26, have risen more than 13 percent since Sept. 27, when the Organization of the Petroleum Exporting Countries announced plans to curb production for the first time in eight years to rein in a global crude glut that has halved prices from mid-2014 highs above $100 a barrel.

Analysts have warned for weeks that U.S. shale oil drillers, responsible for much of the crude glut, could ramp up activity once prices return above $50.

"This is what we've been anticipating. With prices at these levels and rising, rig count increases will likely be in the double digits hereon," said Tariq Zahir, crude trader at Tyche Capital Advisors in New York.

Some traders think the U.S. government will report a weekly rise in crude inventories next week to counter the surprise draw in this week's report that drove WTI prices to July 2015 highs.

"We've shorted WTI at $51 in the hope of reaching $47.50 if there's be a build big enough to counter the recent draw," said Phil Davis, trader at PSW Investments in Woodland Park, New Jersey.

(Additional reporting by Barani Krishnan in NEW YORK and Karolin Schaps in LONDON; Editing by Mark Heinrich and David Gregorio)