Oil Slips but Holds Most Recent Gains on Expected OPEC Cuts

Oil prices slipped on Thursday but held on to most recent gains, supported by OPEC-led supply cuts, tension in the Middle East and lower U.S. production.

Brent crude fell by $1.13 a barrel to a low of $57.02 before recovering a little to $57.30 by 1345 GMT. The global benchmark was still about 30 percent above its mid-year levels. U.S. light crude was down 75 cents at $51.29, almost 25 percent higher than June's lows.

Analysts said some investors were taking profits after two weeks of gains but that upward momentum remained strong.

"The oil market is tightening gradually," said Tamas Varga, analyst at London brokerage PVM Oil Associates.

"OPEC is expected to roll over output restrictions for another nine months, supplies are at risk in the Middle East and U.S. inventories are falling."

The U.S. Energy Information Administration said on Wednesday that U.S. crude inventories fell by 5.7 million barrels to 456.49 million barrels in the week to Oct. 13. 

U.S. output slumped by 11 percent from the previous week to 8.4 million barrels per day (bpd), its lowest since June 2014, as production was shut in by a hurricane.

Instability in the Middle East has increased risks to supply from key oil-producing areas.

"The 'Fragile Five' petrostates - Iran, Iraq, Libya, Nigeria and Venezuela - continue to see supply disruption potential, with northern Iraq crude exports at risk because of an escalation of tensions between the KRG (Kurdistan Regional Government), Baghdad and Turkey, while the United States has decertified the 2015 Iran nuclear deal," U.S. bank Citi said.

Iraqi Kurdistan's oil exports more than halved to 225,000 bpd on Wednesday as the Iraqi military retook some of the biggest fields from Kurdistan's Peshmerga forces.

"Geopolitical risk has returned to the oil market ... As a result, we have raised our ICE Brent forecast for 4Q17 from $45 per barrel to $52," Dutch bank ING said on Thursday.

U.S. President Donald Trump last week refused to certify Iran's compliance with a nuclear deal, leaving Congress 60 days to decide further action against Tehran.

During the previous round of sanctions against Iran, about 1 million bpd of oil was cut from markets.

Analysts say that crude supply should keep tightening if the Organization of the Petroleum Exporting Countries and partners, including Russia, agree an expected extension to their deal to curb production.

"OPEC is desperate to bring the market into equilibrium," said Shane Chanel at ASR Wealth Advisers.

By Christopher Johnson, Additional reporting by Henning Gloystein in Singapore