Oil prices rose for a third day on expectations that major producers are likely to enact deeper output cuts to offset the slump in demand caused by the coronavirus outbreak in China, the world's second-largest crude consumer.
Brent crude rose 17 cents, or 0.3 percent, to $55.96 per barrel at 0217 GMT. U.S. West Texas Intermediate (WTI) rose 29 cents, or 0.6 percent, to $51.46 a barrel.
The Organization of Petroleum Exporting Countries (OPEC) and its allies including Russia, known as OPEC+, recommended last week an additional output cut of 600,000 barrels per day (bpd) to its current 1.7 million bpd reduction to offset the disease-related demand losses.
OPEC yesterday lowered its 2020 forecast for demand for the group's crude by 200,000 bpd, prompting expectations that OPEC+ will enact the cuts when the group next meets, possibly as early as this month.
Russia's government has not made clear that it will endorse the deeper cuts but a majority of Russian oil companies want the cuts extend through the second quarter at least, a senior Lukoil official said on Wednesday.
"Oil is up as OPEC awaits an official response from Russia regarding proposed production cuts," Stephen Innes, chief market strategist at AxiCorp, said in a note on Thursday.
Oil may also be rising as traders who opened so-called short positions, or bets that prices will fall, are buying futures contracts to lock in profits from the recent plunge in oil prices, said Innes.
Brent and WTI have fallen more than 20 percent from their 2020-peak in January. The contracts rose over 3 percent on Wednesday as a slowdown in new Chinese coronavirus cases boosted expectations of a demand recovery.
Those expectations for a price recovery "should send more shorts running for cover," Innes said.
Still, data on the number of new confirmed cases in Hubei province, the epicentre of the outbreak, indicates that the outbreak and its impact on oil demand will continue. New cases jumped by 14,840 on February 12 to 48,206, and deaths climbed by a daily record of 242 to 1,310, the province said on Thursday, reflecting changes to the diagnostic methodology.
Travel restrictions to and from China and quarantines within the country have curbed oil consumption.
The expectations for lower future fuel demand because of the virus has shifted the market structure for both WTI and Brent into a contango, when prompt prices are less than later prices.
The price of the front-month April Brent contract is at a current discount of 50 cents a barrel to the September future.
Adding to the sense of a well-supplied market, U.S. crude inventories in the week to Feb. 7 increased by a more-than-expected 7.5 million barrels to 442.5 million barrels, the Energy Information Administration said on Wednesday. That is the highest since the week of December 13.