US oil prices held above $39 a barrel on Thursday ahead of new data on fuel stockpiles in the United States, with dealers saying physical supplies looked comfortable and the market was likely to head lower.
US light crude climbed 18 cents to $39.26 a barrel, retracing one-third of Wednesday's 57-cent fall, which was triggered by an end to supply disruptions in Iraq and Nigeria.
Despite the slide, oil remains nearly $4 above levels on June 29 when supply disruptions triggered the latest rally back towards $40.
"The physical market looks comfortable, it's a little surprising prices didn't come off more on Wednesday. I think people are a little nervous about the (EIA) stats," said Tony Nunan, manager at Mitsubishi Corp's international petroleum business in Tokyo."People were spooked by the strength of the rally in the last week. Anyone who was short would have got burned in the last few days," said Nunan.
The US government Energy Information Administration (EIA) is due to release its weekly US inventory report on Thursday, a day later than usual because of a public holiday on Monday.
The statistics are closely monitored for a snapshot of the supply-demand balance in the world's biggest oil consumer. Last week's figures bucked market expectations to show a fall of 500,000 million barrels in crude inventories.
Eight analysts surveyed by Reuters on Tuesday forecast an average rise of 1.5 million barrels in crude supplies in the week to July 2. Analysts also predicted that gasoline inventories would fall by one million barrels and distillate stocks would go up by 600,000 barrels.
"If the stats are bearish, I think the market will really sell off," said Nunan.
Iraqi crude exports, almost halved by sabotage to a pipeline at the weekend, have recovered to near-normal levels at about 1.7 million barrels per day (bpd) and French oil major Total has resumed daily output of 225,000 barrels, which was shut by a workers' protest in Nigeria.
Prices also fell on Wednesday on comments from Saudi Arabia that the Organisation of the Petroleum Exporting Countries (OPEC) would increase official supply limits by 500,000 bpd next month.
The cartel had agreed to raise supplies by two million bpd from July and an additional 500,000 bpd from August to a total 26 million bpd. But some ministers have said the second stage of the increase would need to be confirmed at the group's next meeting in Vienna on July 21.
Opec members, which control half of global crude exports, have been pumping near capacity this year to cool prices, which reached a 21-year peak above $42 in June.
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