US crude oil gained more than $1 to hit a fresh 4-month high on Tuesday, as traders anticipated continued demand for the US benchmark following a report of a large draw from the Cushing, Oklahoma storage hub. Brent crude oil futures hit $110 a barrel, the highest in almost seven weeks, supported by a weaker dollar, cold weather in the United States and concern about threats to supply in the Middle East and Africa.
Industry intelligence provider Genscape showed a drop of 1.4 million barrels at Cushing from the previous Tuesday, traders said. "That's continuing to add to the bullish sentiment for US crude," said Andy Lebow, vice president at Jefferies Bache in New York. "There seems to be some risk-on, more speculative money coming into the crude market based on the expectation that demand in the US will continue to grow."
Libya's output fell and South Sudanese rebels said they had seized control of an oil-producing state capital, raising concerns about supply and supporting Brent. The United States and Iran said reaching an agreement on a long-term nuclear deal would be difficult, if not impossible. "There was a moment towards the end of last year when there was a bit of improvement in the geopolitical situation on a number of fronts. That seems to have gone into reverse now," said Christopher Bellew, a senior broker at Jefferies Bache in London.
Brent crude rose 84 cents to $110.02 by 12:31 pm EST (1731 GMT) after earlier reaching $110.10, its highest since January 2. US crude rose $1.62 to $101.92 from Friday, its highest since October. There was no settlement on Monday as US markets were shut for the Presidents Day holiday. Libyan production was just 375,000 barrels per day as protests disrupted flows from a large oilfield, El Sharara, the state oil company said on Tuesday. On Sunday, output was 390,000 bpd.
South Sudan says it has already been forced to cut oil output by a fifth to 200,000 bpd, all of which is pumped from Upper Nile. Rebel control of Malakal could raise doubts about its ability to maintain the rate of output. The dollar traded near a six-week low against a basket of currencies on Tuesday, supporting commodities such as oil that are priced in dollars.
Oil drew support last week from an International Energy Agency report showing that inventories in the developed world had posted their steepest quarterly decline since 1999 in the last three months of 2013. Reports on US oil inventories will be released later this week.
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