Oil rose on Tuesday following sharp losses in the previous session as dealers anticipated the impact of Opec''s production cut and awaited US inventory data expected to show falling fuel supplies. US light crude settled up 37 cents to $58.73 a barrel after dropping $2.39, nearly 4 percent, on Monday. Brent crude gained 35 cents to $59.03.
US crude had traded down as low as $57.05 earlier Tuesday, the lowest level since October 20, on easing tensions in Nigeria and lingering doubts over whether Opec will fully implement its output cuts. US government inventory data to be released on Wednesday was expected to show a 1.3 million barrel drop in distillate stocks, including heating oil, according to a Reuters poll of analysts. Gasoline stocks in the world''s top consumer were also forecast to fall 1.3 million barrels.
"There wasn''t much compelling bearish news to keep this market down, so we were looking for a little bounce. We also saw some book-squaring ahead of tomorrow''s inventory data," said Tim Evans of Citigroup Global Markets.
The Organisation of Petroleum Exporting Countries decided earlier this month to trim supplies by 1.2 million barrels per day (bpd) to stem a 25 percent slide in oil prices since mid-July.
"The Opec action was not designed to turn the market around, it was designed to keep it from falling," said Bill O''Grady, analyst for A.G. Edwards. "If Opec had not stepped in, we might have been headed for the mid-$40s. You may hear some doubts about Opec, but my perception is that when the Saudis are on board, these things usually work out."
Saudi Arabia, the world''s largest oil exporter, and the United Arab Emirates have already told customers of supply cuts. Opec members such as Kuwait and Libya have yet to do so. But Nigeria, which was the first to instigate voluntary cuts, was expected to raise oil exports in December. Easing tensions in the Opec nation also added to bearish sentiment.
Western oil companies in Nigeria were free to resume production of 62,000 bpd at four oil pumping stations after striking a deal with protesters late on Monday. Villagers invaded the stations last Wednesday demanding contracts from the operators, Royal Dutch Shell and Chevron.
But as one problem subsided, another dispute was brewing. Nigerian unions threatened to shut all oil fields operated by Italian oil company Agip, which produces 200,000 bpd in the country, unless it paid staff a security bonus. Attacks have cut Nigerian output by 500,000 bpd since February.
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