Oil prices rose on Thursday after OPEC sources said the group could extend its oil supply-reduction pact with non-members and might even apply deeper cuts if global crude inventories failed to drop to a targeted level.
OPEC and other exporters including Russia agreed last year to cut output by 1.8 million barrels per day (bpd) to reduce a price-sapping glut. The deal took effect on Jan. 1 and lasts six months.
Most producers appear to be sticking to the deal so far but it is unclear how much impact the supply reductions are having on world oil inventories that are close to record highs.
The supply pact could be extended by May if all major producers showed "effective cooperation", an OPEC source told Reuters.
"There’s a good chance and high odds that the group (OPEC) decides that they want to continue this process," Energy Aspects analyst Richard Mallinson said.
Benchmark Brent crude was up 30 cents at $56.05 a barrel by 1330 GMT. U.S. light crude gained 30 cents to $53.41 a barrel.
Global inventories are bloated and supplies high, especially in the United States.
U.S. crude and gasoline inventories soared to record levels last week as refineries cut output and gasoline demand softened, the Energy Information Administration said on Wednesday.
Crude inventories jumped 9.5 million barrels in the week to Feb. 10, nearly three times more than forecasts, boosting commercial stocks to a record 518 million barrels.
Gasoline stocks rose by 2.8 million barrels to a record 259 million barrels.
U.S. crude production, meanwhile, has risen 6.5 % since mid-2016 to 8.98 million bpd.
Analysts say the oil market is balanced between these twin pressures: OPEC cuts and rising U.S. inventories and production.
Brent and U.S. crude futures have traded within a $5 per barrel range since the start of the year.
"Prices have not seen this kind of stability for several years," said David Wech, managing director of Vienna-based consultancy JBC Energy.
"However, if crude prices are to break out of their recent range in the next few weeks, the risk is to the downside."
Gavin Wendt, founding director and senior resource analyst at commodity research firm MineLife, said: "The world oil market is very much in wait-and-see mode, which is why the price has remained in the mid-$50s per barrel range since mid-December."