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Oil settles at $51.03, best close in 4 weeks on expected drop in US crude stockpiles

A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.
Nick Oxford | Reuters
A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.

Oil prices on Tuesday rose to a near one-month high as expectations of a drawdown in U.S. crude and product inventories outweighed news of higher Libyan production.

Benchmark Brent crude oil rose 95 cents, or 1.8 percent, to $54.07 a barrel by 2:33 p.m. (1833 GMT). That pushed the global benchmark over its 100-day moving average, into overbought territory for the first time since the end of December.

U.S. light crude oil ended trading 79 cents, or 1.6 percent, higher at $51.03 a barrel.

Both contracts hit their highest level since March 8. They hit four-month lows late last month but have recovered 8 percent since then on expectations the Organization of the Petroleum Exporting Countries and other producers would cut output under an agreement reached last year.

"OPEC compliance is still holding better than we expected with next week's release of various monthly agency reports likely to confirm," Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note.

Demand is picking up ahead of summer in key markets, including the United States, the world's biggest oil consumer, where analysts forecast industry data this week will show a decline in oil inventories.

U.S. crude and oil product stocks probably fell last week after rising for two consecutive weeks, a Reuters survey showed.

The American Petroleum Institute will report inventory data at 4:30 p.m. EDT on Tuesday, while the U.S. Department of Energy's Energy Information Administration will announce official stocks figures on Wednesday at 10:30 a.m. EDT.

"U.S. product stocks need to be watched closely, since they have fallen massively over the last few weeks," said Carsten Fritsch, commodities analyst at Commerzbank in Frankfurt.

Yet global inventories remain high. UBS analyst Giovanni Staunovo said OPEC was taking longer than expected to tighten the oil market but recent data suggested the process was now well under way.

"We believe the implemented production cuts will trigger a material drawdown in OECD oil inventories and thus higher crude oil prices," Staunovo said, referring to the Organisation for Economic Co-operation and Development.

"We expect Brent oil prices to rise above $60 a barrel in three months," Staunovo said.

U.S. light crude may drop to $49.62 a barrel as it failed to break resistance at $50.95, said Reuters commodities markets technical analyst Wang Tao. Brent crude may retrace back to $52.79 per barrel, he said.

Libya's crude output increased after state-owned National Oil Corp lifted a force majeure on loadings of Sharara oil from the Zawiya terminal, sources told Reuters.