Oil prices rise as U.S. producers struggle, focus shifts to inventory

By Henning Gloystein
SINGAPORE, March 16 (Reuters) - Oil prices rose early on
Wednesday after falling in the previous session, with U.S.
producers showing increasing signs of financial distress and as
focus shifted to U.S. inventory data due later in the day.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were
trading at $36.94 per barrel at 0117 GMT, up 60 cents from their
last settlement.
International benchmark Brent futures LCOc1 were up 40
cents at $39.14 a barrel.
The climbs came after crude prices dropped around 2 percent
the previous session.
Preliminary inventory data from industry group American
Petroleum Institute (API) showed late on Tuesday that U.S. crude
stockpiles rose 1.5 million barrels last week, but by less than
half of what was expected by an analyst poll, lending markets
some support.
The U.S. government's Energy Information Administration
(EIA) will issue official inventory figures, which have hit
consecutive records over the past weeks, later on Wednesday.
EIA/S
"The focus on U.S. oil inventory will be even greater this
week after some strong gains recently. Another build amid signs
of weakness in gasoline demand could see prices under further
pressure," ANZ bank said on Wednesday.
Traders said that the prospect of falling U.S. oil output
was also supporting markets.
U.S. shale producer Linn Energy LINE.O said on Tuesday
that bankruptcy may be unavoidable as the company missed
interest payments amid a slump in oil prices.
Other companies, fighting for survival as banks cut loans,
are seeking a costly alternative by borrowing from private
equity firms at hefty interest rates.
Despite Wednesday's price rises, oil markets remain dogged
by a global supply overhang which sees over 1 million barrels of
crude pumped every day in excess of demand, leaving storage
tanks around the world brimming with unsold oil.
And there are few signs of changing fundamentals. While
major producers like Saudi Arabia and Russia have proposed to
freeze their output at January volumes, near record levels of
over 10 million barrels per day (bpd) each, others are refusing
to cooperate.
Iran, freed from international sanctions which halved its
production to little more than 1 million bpd, has tripled its
output to over 3 million bpd since January.
"Any such deal (to freeze output) would still not be a game
changer. It would really just maintain the excess supply that is
now in place," Thomas Pugh of Capital Economics said in a note.