Crude Oil Ends Higher As Supply-Glut Concerns Ease

(RTTNews) - U.S. crude oil rallied to end sharply higher on Tuesday, after dipping below $51 a barrel earlier in the day, ahead of the weekly official inventory data from the U.S. Energy Information Administration due Wednesday. The uptick comes on the back of some extensive production cuts by U.S. producers with is expected to have a significant impact on oil supplies.

Investors also weighed the uncertainty in Europe with the Greek bailout program going nowhere as the latest talks with EU foreign ministers on Monday failed to find any agreement, as the beleaguered country refused to seek any extension as sought by its creditors.

Worries over the ineffective ceasefire agreement in eastern Ukraine also supported oil, with pro-Russian rebels and government forces continuing to battle it out in some of the most volatile regions, east of the country. The continued fighting has fueled fears of some further sanctions by the West on Russia for its failure to stop fighting as agreed. The deteriorating situation in Libya is also seen as contributing to a decline in global supplies.

It appears that OPEC nations may be winning the price war with non-OPEC suppliers such as the U.S. and Canada. OPEC is likely to withstand cheap oil while non-OPEC producers are beginning to abandon projects, lay of thousands of workers and slash earnings forecasts.

While the global market is oversupplied right now, supplies may get tight later in the year if non-OPEC nations cut production.

Light Sweet Crude Oil futures for March delivery, the most actively traded contract, jumped $0.75 or 1.4 percent to settle at $53.53 a barrel on the New York Mercantile Exchange Tuesday.

Crude prices for March delivery scaled a high of $54.15 a barrel intraday and a low of $50.81.

On friday, crude oil settled sharply higher on a weak dollar and rising optimism of demand growth as oil producers continued to scale down investments, as well as over news that pro-Russia rebels and Ukraine government agreed to a ceasefire.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 94.13 on Tuesday, down from its previous close of 94.43 in North American trade. The dollar scaled a high of 94.51 intraday and a low of 93.80.

The euro trended higher against the dollar at $1.1399 on Tuesday, as compared to its previous close of $1.1356 in North American trade. The euro scaled a high of $1.1450 intraday and a low of $1.1328.

In economic news from the U.S., business activity among New York manufacturers continued to expand modestly in February, a Federal Reserve Bank of New York report said Tuesday, although the index of activity in the sector fell more than expected. The New York Fed's headline general business conditions index dipped to 7.8 in February from 10.0 in January. Economists had expected the index to edge down to 9.5.

A National Association of Home Builders report on Tuesday showed an unexpected deterioration in U.S. homebuilder confidence in February, reflecting the unusually high snowfall across much of the country. The NAHB/Wells Fargo Housing Market Index dropped to 55 in February after dipping to 57 in January. Economists expected the index to inch up to a reading of 58.

German economic confidence rose for the fourth consecutive month to a one-year high in February, despite the continuing uncertainty over future Greek funding plan, a closely watched survey showed Tuesday. The economic sentiment index rose to 53 from 48.4 in January, the Mannheim-based Centre for European Economic Research, or ZEW said. This was the highest score since last February, when the reading was 55.7. But the score was below the expected level of 55.

British inflation eased more than expected to a record low in January on falling motor fuel and food prices, vindicating the assessment that it is moving into negative zone. Output prices also logged its biggest fall on record. Inflation dropped to 0.3 percent in January from 0.5 percent in December, the Office for National Statistics reported Tuesday. It was forecast to slow to 0.4 percent. This was the lowest since records began in 1989.

House prices in the United Kingdom rose at the slowest pace in eight months during December, data from the Office for National Statistics showed Tuesday. The house price index climbed 9.8 percent annually in December after a 9.9 percent rise in the previous month. Economists expected a 9.5 percent increase.