By Jenny W. Hsu 
 

Crude futures clawed back some overnight losses in Asia Tuesday, thanks to a weaker dollar but strong U.S. production and uncertainty over the effectiveness of OPEC's production cut deal will likely limit the gains.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in May traded at $47.97 a barrel at 0221 GMT, up $0.24 in the Globex electronic session. May Brent crude on London's ICE Futures exchange rose $0.20 to $50.95 a barrel.

The greenback was last down 0.03% to 89.64 according to the WSJ Dollar Index which pits the dollar against 16 currencies. As oil is traded in the dollar, a weaker greenback means cheaper oil for foreign traders. The decline in dollar reflects investors' doubts over U.S. President Donald Trump's ability to deliver on his pro-growth campaign promises, said Barnabas Gan, an economist at Singapore bank OCBC.

Oil prices have been facing selling pressure lately as rising crude production in the U.S. threatens to frustrate an ongoing effort to reduce global crude stockpiles.

Analysts surveyed by S&P Global Platts estimate U.S. crude stockpiles rose by 300,000 barrels in the week ended March 24. The firm also expects gasoline and distillates stocks to show a drawdown of 2.1 million barrels and 1.1 million barrels, respectively. Official figures, including production rate, will be released on Wednesday by the U.S. Energy Information Administration.

"Even if U.S. crude oil stocks start to show a drawdown, other aspects of the oil market, which have received less attention, show the physical market is struggling in terms of rebalancing," the firm warned.

Surging U.S. production comes at a time when the Organization of the Petroleum Exporting Countries and 11 other producers are cutting their output to pare down global inventories. The success of the deal so far has garnered mixed reviews.

While some believe these producers should extend the cuts into the second half of the year to reset the market back into a balance, others say cutting more output gives U.S. shale oil producers more impetus to ramp up their production.

Moreover, market watchers say a new gush of U.S. oil into the market could entice OPEC members to forsake their pledges to curb production.

"OPEC members are known for saying one thing and doing another," said Ben Le Brun, market analyst at Sydney's OptionsXpress. If OPEC agrees to prolong the cut deal, "the cartel would essentially be shooting themselves in the foot", he said.

The committee that monitors the deal will meet in late April to present its recommendation on the fate of the pact. A final decision will be taken by the oil cartel on May 25.

Oil investors are also watching the rising oil production and exports out of Libya, an OPEC member exempted from the output cut deal. Platts reported that Libya's National Oil Corp. on Sunday shipped out its first crude oil cargo of around 1 million barrels from the Es Sider oil terminal, a facility that recently resumed operation after conflicts between the government and the insurgents had forced it to shut-down.

Russia is another wild card that could thwart OPEC's plan to dry out the market. Even though the world's biggest energy producer agreed to cut its production by 300,000 barrels a day as part of the deal, its energy minister Alexander Novak over the weekend confirmed production has only declined by 185,000 barrels a day so far, and will hit 200,000 barrels by the end of the month.

Nymex reformulated gasoline blendstock for April--the benchmark gasoline contract--rose 2 points to $1.6191 a gallon, while April diesel traded at $1.5032, 7 points higher.

ICE gas oil for April changed hands at $453.25 a metric ton, up $2.00 from Monday's settlement.

Write to Jenny W. Hsu at jenny.hsu@wsj.com

(END) Dow Jones Newswires

March 28, 2017 00:00 ET (04:00 GMT)