Oil prices rose nearly 2 percent and hit a one-week high on Tuesday, boosted by a weaker dollar, short covering and expectations that crude inventories in the United States may decline for a third consecutive week.
It was the fourth straight session of gains for oil, which also got some support after the chief executive of US shale oil producer Pioneer Natural Resources Co said Saudi Arabia likely will move to boost oil prices to prop up its finances. Prices pared gains after hours when an industry group's reported an unexpected rise in US crude inventories.
With the end of the quarter approaching, brokers said investors were covering short positions. Brent crude futures, the international benchmark for oil prices, gained 82 cents, or 1.79 percent, to settle at $46.65 per barrel. US crude futures ended the session up 86 cents, or about 1.98 percent, at $44.24 per barrel. Brent touched a one-week high of $47.06. US crude hit its highest since June 19 at $44.44.
"I think in the market, over the last four weeks or so, every news item has been uniformly bearish, even the technical situation has been bearish and a lot of the entrenched bulls were really throwing in the towel," said Andrew Lebow, senior partner at Commodity Research Group in Darien, Connecticut. "The downside momentum was clear and today it just got to a level where it's been arrested for the time being."
After settlement, American Petroleum Institute (API) data showed US crude inventories rose 851,000 barrels in the week to June 23 to 509.5 million. Analysts had forecast a decline of 2.6 million barrels. On Wednesday morning, the US Energy Information Administration (EIA) will report official inventory data.
The dollar fell more than 1 percent against a basket of currencies. Commerzbank said in a research note that long positions in Brent on ICE are "at their lowest level in a year and a half," while short positions "have soared to a new record high, having increased more than four-fold since the beginning of the year."
The Organization of the Petroleum Exporting Countries and other producing nations have sought to reduce a global crude glut with production cuts. Yet global crude inventories have not fallen, as the United States and other countries have boosted output.
Ian Taylor, head of the world's largest independent oil trader Vitol, told Reuters Brent prices would stay in a range of $40-$55 a barrel for the next few quarters. Opec delegates said the cartel will not rush into further output cuts or end the exemptions some member countries enjoy, although a meeting in Russia next month is likely to consider further steps.
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