Oil markets on Tuesday were torn between production cuts by major exporters Saudi Arabia and Russia and reports that supplies from other regions including North America, Iraq, and Iran could offset any restraint aimed at curbing a global glut.
Prices for Brent crude futures, the international benchmark for oil prices, were trading at $54.99 per barrel early on Tuesday, up 5 cents from their last close.
US West Texas Intermediate crude futures were trading at $52.04 per barrel, up 8 cents.
That came after prices fell about 4% the previous session on the back of concerns that rising output in Iraq and Iran and increased drilling in North America were undermining efforts led by Saudi Arabia to curb a global fuel supply glut that has weighed on markets for over two years.
Iraq, the second biggest producer within Opec, has given full supply allocations of Basra crude to three refiners in Asia and Europe for February, several sources with direct knowledge of the matter said on Monday.
And although traders said that oil markets had good support in the lower $50s per barrel due to announced cuts by other leading Opec members, especially Saudi Arabia and Abu Dhabi, there was a large degree of uncertainty beyond those price levels as other producers seemed to raise their output.
"The average Canadian rig count for December 2016 was 209, up 36 from the 173 counted in November 2016, and up 49 from the 160 counted in December 2015," said Matt Stanley, a fuel broker at Freight Services International in Dubai.
"A 30% increase in Canadian rigs in a year... The bear in me is well and truly back," he added.
Drilling for new oil production in the United States is also increasing as US energy companies last week added rigs for a tenth week in a row, extending the drilling recovery into an eighth month as crude prices remained at levels at which many US drillers can operate profitably.
Adding one-off supplies, the US Department of Energy on Monday issued a Notice of Sale for crude from its Strategic Petroleum Reserve (SPR), with bids for 8 million barrels of light, sweet oil due by 17 January, in order to fund improvements to the infrastructure that holds the emergency reserves.
