Crude prices staged a mild rally in Asia on Friday with U.S. crude nearing the key $50 a barrel mark ahead of weekly rig count figures expected to set the near-term tone ahead of next week's meeting of OPEC and allied producers on production cuts.
On the New York Mercantile Exchange, crude futures for June delivery rose 0.85% to $49.77 a barrel, while on London's Intercontinental Exchange, Brent gained 0.70% to $52.88 a barrel.
In figures reported last Friday, oilfield services firm Baker Hughes (BHI) said U.S. drillers added 9 oil rigs to take the total to 712 rigs for the 17th weekly gain in a row and extending an 11-month drilling recovery to the highest level since August 2015, implying that further gains in domestic production are ahead.
Overnight, crude futures settled higher on Thursday, as investors remained optimistic that OPEC would reach an agreement to extend the current supply-cut deal beyond June at its meeting next week.
In what was a choppy day of trade, oil futures recovered from a more than 1% slump, as investors' optimism that OPEC would seek an extension of the current deal to cut global production offset concerns over the rising level of U.S. shale production.
The Energy Information Administration said Wednesday crude oil inventories fell by 1.75 million barrels last week, which was the sixth-straight week of declining crude stockpiles, but the dip in inventories fell short of expectations of a draw of around 2.4 million barrels.
Despite the high level of compliance from OPEC members with the deal to rein in supply, global production remains above the five-year average, as non-OPEC members, who are not part of the supply-cut agreement have ramped up production.
In its monthly report last Thursday, OPEC estimated that non-OPEC production this year would grow by 950,000 barrels per day (bpd).
OPEC and other producers are set to meet on May 25 to decide whether to extend the current supply-cut deal amid growing optimism for a prolonged period of cuts.
Saudi Arabia and Russia agreed earlier this week that production cuts needed to be extended for a period of nine months until March 2018.
The International Energy Agency (IEA) on Wednesday, however, warned that OPEC’s effort to rein in the glut in supply may fail even if the oil group agrees to extend its supply cut agreement.