By Barani Krishnan
NEW YORK (Reuters) - Oil prices rallied again on Thursday, boosted for a second day by U.S. government data that showed a surprising crude inventory drop, but crude futures pared gains as traders worried that OPEC was not nearing an agreement to reduce a global glut.
Oil prices got more support from the dollar's (DXY) slide a day after the Federal Reserve kept U.S. interest rates unchanged. [FRX/]
U.S. West Texas Intermediate (WTI) crude futures (CLc1) settled up 98 cents, or 2.2 percent, at $46.32 a barrel. The session high for WTI was $46.52.
Brent crude futures (LCOc1) rose 82 cents, or 1.8 percent, to settle at $47.65. The session peak for Brent was $47.83.
Week-to-date, WTI rose 8 percent and Brent 4 percent, on track to their biggest weekly advance in nearly a month.
Crude futures gave back some gains after Reuters reported that a two-day expert-level meeting of the Organization of the Petroleum Exporting Countries on production cooperation had yielded no major breakthrough.
The meeting was held in advance of Sept. 26-28 talks in Algeria between OPEC and other major oil producers to discuss a potential output freeze.
"A production freeze won't be enough, we need real cuts," said Phil Davis, trader at PSW Investments in Woodland Park, New Jersey. "I'm shorting WTI once it gets to $47.50 because I don't think anything good will come out of these talks."
Tariq Zahir of Tyche Capital Advisors in New York said even if cuts were agreed on, they will have to be enforced "and OPEC doesn't have history on its side for compliance".
Oil has rallied several times this year on hints of output curbs by OPEC and other oil exporters, only to fall later as production rose. Saudi and Russian production are at record highs while Libya and Nigeria are restarting key crude exports that were stalled. [OPEC/M]
This week, oil rose after Wednesday's report by the U.S. Energy Information Administration (EIA) that crude stockpiles fell 6.2 million barrels last week, bringing the draw to more than 21 million barrels for this month. [EIA/S]
Also supportive for prices was a forecast by New York-based PIRA Energy Group, that it expects the EIA to report a further drop of 2.85 million barrels next week.
Some doubted PIRA's forecast, citing the 213,000-barrel build at the Cushing, Oklahoma delivery hub for WTI futures for the week to Sept. 20 reported on Thursday by energy monitoring service Genscape. The Genscape report followed EIA data showing a build of 526,000 barrels at Cushing for the week ended Sept. 16.
"We also feel that the market will need to recognize bearish aspects within the (EIA) data," Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates said, citing rising U.S. crude production and oil rigs. [RIG/U]