Oil prices jumped more than $2 a barrel on Tuesday, breaking out of a month-long trading range on technical buying and industry talk as well as U.S. government data suggesting the global supply glut could be ebbing.
Global benchmark Brent crude rallied for a third straight day and closed above $50 a barrel the first time in a month. In post-settlement trade, it briefly jumped $3 after an industry group reported an unexpected weekly drop in US crude stockpiles.
Earlier, Brent rose on a U.S. government forecast for tighter oil supplies, and indications that Russia, Saudi Arabia and other big producers might pursue further talks to support the market. A weaker dollar and chart-based buying also bolstered crude prices.
Some dealers were convinced there was now little chance that Brent and the West Texas Intermediate (WTI) benchmark for U.S. crude would slide back to the 6-1/2-year lows touched in August.
"We have reduced the probability of a return to the $37 to $38 area per nearby WTI," said veteran oil analyst Jim Ritterbusch. "We will maintain a longstanding view that price declines below this support level are virtually off of the table." Brent settled up $2.67, or 5.4 percent, at $51.92, breaking out of the $47 to $50 band it had held since early September.
Its session peak, a penny shy of $52, was the highest since Sept. 3, pushing three-day gains past 7 percent.
WTI closed up $2.27, or 4.9 percent, at $48.53 a barrel.
After settlement, Brent and WTI rose more when the American Petroleum Institute reported a weekly U.S. crude stockpile draw of 1.2 million barrels. Analysts polled by Reuters had forecast a second straight weekly increase in crude inventories.
Official stockpile numbers will be published on Wednesday by the U.S. Energy Information Administration (EIA).
"Steeper U.S. production declines over the near term have created a bid for oil prices," said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland.
In its monthly supply-demand report on Tuesday, the EIA said global oil demand will grow in 2016 by the most in six years while non-OPEC supply stalls. Decline Oil executives at an industry conference in London warned of a "dramatic" decline in US output that could lead to a price spike if fuel demand escalates.
Russia's energy minister said Russia and Saudi Arabia discussed the oil market in a meeting last week.
OPEC Secretary-General Abdullah al-Badri said in London that OPEC and non-OPEC members should work together to reduce the global supply glut.
Iran's crude sales were on track to hit seven-month lows as its main Asian customers bought less.
Source: Gulf News