By Christopher Johnson
LONDON (Reuters) - Oil prices rose on Wednesday, supported by a drop in U.S. commercial crude inventories and the loss of storage capacity in Libya, with investors cautious ahead of a biannual meeting of OPEC exporters to decide production policy.
Benchmark Brent crude was up 50 cents at $75.58 a barrel by 0835 GMT. U.S. light crude was 50 cents higher at $65.57.
U.S. crude inventories fell by 3 million barrels to 430.6 million barrels in the week to June 15, according to an American Petroleum Institute report on Tuesday.
Traders said a drop in Libyan supplies due to the collapse of an estimated 400,000-barrel storage tank also helped push up prices.
Looming large over markets, however, were meetings scheduled on June 22-23 in Vienna of the Organization of the Petroleum Exporting Countries with other big producers, including Russia.
De facto OPEC leader Saudi Arabia, as well as Russia, which is not a member of the cartel but is the world's biggest oil producer, are pushing to loosen supply controls introduced to prop up prices in 2017.
Other OPEC members, including Iran, are against such a move, fearing a sharp slump in prices.
"Unlike previous meetings, the run-up to this OPEC meeting is fraught with uncertainty with Iran from the onset adopting a very entrenched opposition to any supply increase," Harry Tchilinguirian, head of global oil strategy at French bank BNP Paribas, told the Reuters Global Oil Forum.
Technical analysts who follow price charts say prices are unpredictable ahead of the OPEC meeting: "The market is now stuck in an OPEC-wary condition. It is likely to be thrown around by headlines and over enthusiastic participation is not advised," said Robin Bieber, director of London brokerage PVM Oil Associates.
Jack Allardyce, research analyst at Cantor Fitzgerald Europe, expects OPEC to compromise and agree a fairly modest increase of 300,000-600,000 barrels per day in production, equivalent to about 0.5 percent of world production.
"We could see this knocking $5 per barrel off Brent," Allardyce said.
Markets are also anxiously watching trade tensions between the United States and China, in which both sides have threatened to impose stiff duties on each other's exports, including U.S. crude oil.
A 25 percent tariff on U.S. crude oil imports, as threatened by China in retaliation for duties Washington has announced but not yet implemented against Chinese products, would make U.S. crude uncompetitive in China versus other supplies.
This would almost certainly lead to a sharp drop-off in Chinese purchases of U.S. crude, which have boomed in the last two years to a business now worth around $1 billion per month.
(Additional reporting by Henning Gloystein in Singapore; editing by David Evans and Jason Neely)
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)