The price of oil edged higher above $97 a barrel Thursday as investors reacted to a drop in U.S. stockpiles, but concerns of oversupply in the Middle East capped gains.
By early afternoon in Europe, benchmark U.S. crude for January delivery was up 37 cents at $97.57 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.16 to close at $97.20 on Wednesday
Prices rose after the Energy Department said crude oil supplies fell by 5.6 million barrels, or 1.4 percent, last week, ending 10 straight weekly increases. The decline was more than four times bigger than analysts had predicted.
Market momentum was hindered, however, by Iran's announcement to fellow OPEC members that it plans to pump up to 4 million barrels a day once sanctions on its crude exports are lifted. Libya also hopes to increase output to 2 million barrels a day once unrest ebbs.
In all, OPEC members would have to reduce their production to keep prices from dropping sharply and hurting oil revenues that underpin their economies. This sparked concerns of a production war inside the cartel, which held a meeting on Wednesday.
"Many OPEC member countries are not willing at the present time to cut back their supply," said a research note from analysts at Commerzbank in Frankfurt. "The next OPEC meeting on June 11 promises to be a good deal more exciting and conflict-ridden than (Wednesday's) was."
The Commerzbank analysts also said it was skeptical that Libya would be able to open all its exports terminals next week after suffering big production problems.
Brent crude, a benchmark for international oils, was up 9 cents at $111.97 a barrel on the ICE exchange in London.
In other energy futures trading on Nymex:
— Wholesale gasoline was nearly flat at $2.72 a gallon.
— Heating oil shed 0.45 cent to $3.0636 a gallon.
— Natural gas added 1.4 cents to $3.974 per 1,000 cubic feet.