* U.S. crude stockpiles expected to fall second week in row
* Canada wildfires rage anew, causing oil firms more woes
* Libya deal signals first step in output resumption there
* Bank of America, UBS less optimistic on oil rally
* Coming up: EIA inventory data at 1430 GMT on Wednesday
(Adds API data and market reaction in post-settlement trade)
By Barani Krishnan
NEW YORK, May 17 (Reuters) - Oil prices rose for a second
straight day on Tuesday, with U.S. futures hitting seven-month
highs, on expectations of a drawdown in U.S. crude stockpiles
and a new wildfire threat on Canadian oil supplies.
Concerns about the potential for higher Libyan output and
apprehension that the market was reaching overbought levels
initially restrained the rally.
Prices rose after a Reuters poll of oil analysts forecast
U.S. crude inventories likely fell 2.8 million barrels last
week, declining for a second straight week. EIA/S
Sentiment was also boosted by reports of fresh trouble for
Canadian energy producers as a massive wildfire around the oil
sands hub of Fort McMurray, Alberta, shifted north, forcing the
evacuation of about 4,000 people from work camps.
Prices softened after a deal struck in Vienna between rival
Libyan oil factions indicated the first step towards restoring
crude production mostly shut in the North African country. The
Libyan agreement followed Monday's news of potential reopening
for some shuttered Nigerian output.
But in post-settlement trade, U.S. crude's West Texas
Intermediate (WTI) futures rallied anew, reaching mid-October
highs, as bulls pushed closer to the $50-a-barrel target.
WTI CLc1 finished up 59 cents, or 1 percent, at $48.31 a
barrel. The session high was $48.42 while the post-settlement
peak was $48.76.
Brent crude LCOc1 closed up 31 cents at $49.28, hitting a
six-month high of $49.58. In after-hours trade, it got to
$49.75.
The market retraced some of its post-settlement gains after
industry group the American Petroleum Institute reported a U.S.
crude drawdown of 1.14 million barrels for last week - less than
half the level forecast in the Reuters poll. The U.S. Energy
Information Administration (EIA) will issue official inventory
data at 10:30 a.m. (1430 GMT) on Wednesday. API/S
"All in all, this feels like a complex that still possess
enough bullish momentum to boost nearby WTI values to above the
$50 mark, while bolstering July Brent to as high as the $53-54
area," said Jim Ritterbusch of Chicago-based oil markets
consultancy Ritterbusch & Associates.
Notwithstanding Tuesday's rally, some prominent banks in
commodities said oil prices looked overstretched. Reuters data
showed the Relative Strength Indicator for Brent and WTI at 66
and 69, respectively, near the technically overbought level of
70.
Bank of America Merrill Lynch (NYSE:BAC) (BAM) BAC.N reiterated an
end of third-quarter target of $39 for WTI, citing seasonal
weakness from refinery maintenance.
Switzerland's UBS UBSG.S raised its longer-term upward
target for Brent to $55 from $47, but a forecast a near-bottom
as low as $36.
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CHART: Brent oil may retest resistance at $49.56 http://graphics.thomsonreuters.com/US/2/PVB_20161705091609.png
CHART: U.S. oil may gain more to $48.62 http://graphics.thomsonreuters.com/US/2/PVB_20161705090614.png
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