LONDON Oil rose towards $31 a barrel on Tuesday, lifted by hopes that OPEC and non-OPEC producers may be edging closer to a deal to tackle one of the biggest supply gluts in decades.
The Organization of the Petroleum Exporting Countries is making renewed calls for rival producers to cut supply alongside its members, but Russia, seen as key to any deal, has so far refused to cooperate.
Iraqi Oil Minister Adel Abdel Mahdi said on Tuesday he saw "some flexibility" for a deal, the idea of which has been mooted and dismissed repeatedly for more than a year.
Brent crude was up 38 cents at $30.88 a barrel by 1449 GMT, rebounding from an earlier decline. It reached $27.10, its lowest since November 2003, on Jan. 20. U.S. crude was up 20 cents at $30.54.
"Without a production agreement, fundamentals point to lower numbers," said David Hufton of oil broker PVM. "With one, oil becomes a $40-to-$60-a-barrel market."
Demand concerns limited the rally. China's annual rail freight volume fell 11.9 percent in 2015, versus a drop of 3.9 percent in 2014, adding to worries about contracting economic activity in the second-largest oil consumer.
"Fears of a sharp slowdown in economic growth, particularly in China, are dragging down global stock markets from arguably overheated levels," Energy Aspects analysts said in a report. "This is weighing on other risky assets, including oil."
Despite a price collapse and spending cutbacks across much of the industry, major OPEC producers are sticking to investment plans and some intend to boost supply.
The risk of prices staying low for longer is not deterring Kuwait from investing in energy projects, the head of Kuwait Petroleum Corp said on Tuesday, echoing similar comments from the chairman of Saudi Arabia's state oil company.
Iraq might boost output further this year, a senior Iraqi oil official, who asked not to be identified, said on Monday. Production hit a record in December.
Investors are waiting on the U.S. Federal Reserve's policy meeting later on Tuesday for clues on the movement of the dollar. It is the first Fed policy meeting since the central bank raised interest rates in December.
Underlining the oil glut, analysts expect the latest weekly reports on U.S. supplies to show crude inventories, already close to a record high, rose further.
The American Petroleum Institute, an industry group, releases its supply report at 2130 GMT and the government's data is due on Wednesday.
(Additonal reporting by Meeyoung Cho in Seoul; editing by David Evans and David Goodman)
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Updated Date: Jan 26, 2016 22:00 PM