U.S. crude futures rebounded on Wednesday on investor hopes a deal between Saudi Arabia and Russia to freeze oil output at January levels would lead to a wider pact among producers that could eventually see production cuts to support prices.
U.S. crude had risen 24 cents to $29.28 a barrel by 0033 GMT, after ending the previous session down 40 cents.
Top oil producers Russia and Saudi Arabia on Tuesday agreed to limit oil production at January levels, provided other oil exporters joined in, and stopping short of agreeing cuts in oil output.
Iraq, Qatar and Venezuela said they would freeze output at January levels provided a deal could be agreed, while OPEC member Iran could be offered special terms to freeze oil production levels, sources said.
Oil prices initially surged on Tuesday on news of the deal but early gains were wiped out on the realisation there would be no immediate supply cuts to tackle global oversupply.
"It was a buy the rumour, sell the fact event," said Ben Le Brun, market analyst at Sydney's OptionsXpress.
"The market is coming around to the idea that it is not bad news, but not as good news as it was anticipating," he said.
"The market was hoping for production cuts rather than a production halt at January levels," Le Brun said.
Investors were mindful a production freeze may lead to "potentially better news" in terms of output cuts, he said.
"Overall, it's not bad news."
Investors are also eyeing U.S. oil inventory data later on Wednesday for further direction on oil prices.
U.S. crude stocks rose by 3.9 million barrels to 505.9 million barrels in the week to Feb. 12, according to a Reuters poll of analysts on Tuesday.
Weekly inventory reports from industry group the American Petroleum Institute (API) and the U.S. Department of Energy's Energy Information Administration (EIA) will be released on Wednesday and Thursday respectively, a day later than usual because of a public holiday on Monday.
