Oil prices rose Tuesday as traders perceived that an overnight drop of nearly 2 percent was overdone given the outlook for continued strong energy demand and uncertainty over Iran.
"The last couple of days have been feeling a bit like a recoil as the weather's got warmer in the U.S. and temperatures have also gone down in the Iran issue," said Tobin Gorey, commodity strategist at Commonwealth Bank of Australia in Sydney. "Today it looks like the market is recovering some lost ground."
Light, sweet crude for April delivery gained 33 cents to US$59.24 a barrel in Asian electronic trading on the New York Mercantile Exchange, mid-afternoon in Singapore. The contract dropped US$1.14 to settle at US$58.91 a barrel Monday.
Brent crude contract for April delivery rose 34 cents to US$61.08 a barrel on the ICE Futures exchange in London.
The U.S. National Weather Service is predicting above-normal temperatures in most parts of the U.S. Northeast and Midwest for the next two weeks, leading traders to bet that the heating oil season is ending. On Monday, temperatures hit about 60 degrees Fahrenheit (15 degrees C) in New York, Chicago, and Washington, according to AccuWeather.com.
Still, robust global energy demand and ongoing uncertainty about Iran's failure to comply with demands to halt its uranium enrichment program should support crude prices, analysts said.
Also, U.S. gasoline inventories are declining just a few months ahead of the summer driving season when demand peaks.
"We see this breakdown in crude prices as a temporary and mostly technically-based situation, because the market had become a bit overextended," said Mike Fitzpatrick at Fimat USA, in a research note. "Once the market's technical correction is complete, we anticipate the energy complex to resume an upward trend based on tightening product stocks, a low refinery (operating) rate, strong gasoline demand and geopolitical worries."
Traders also believe that the Organization of Petroleum Exporting Countries will keep production quotas stable at its meeting later this week.
"They don't perceive a need to cut," Gorey said, adding the oil cartel would likely reconsider output levels if oil prices fall into the low-US$50s level. "Expectations are very widespread that it would be a surprise if they did anything one way or another."
OPEC, which reduced oil output late last year and again in February, meets Thursday in Vienna, Austria. In Dubai, OPEC President Mohammed al-Hamli said global oil demand this year appears robust and expressed satisfaction with member compliance to previously decided production cuts although he said the organization was closely watching inventories that remained higher than average, reports AP.
Heating oil futures added 1.2 cents to US$1.6943 a gallon (3.8 liters) while natural gas prices rose 0.9 cents to US$6.921 per 1,000 cubic feet.
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