Oil prices rose 4 percent on Tuesday, tracking a bounce on Wall Street, after US Federal Reserve Chairman Ben Bernanke said he was committed to protecting the troubled banking sector. Figures showing higher-than-expected compliance by the Organisation of Petroleum Exporting Countries to its agreed production cuts encouraged the gains, dealers said.
US crude oil rose $1.52 to settle at $39.96 a barrel, while London Brent crude rose $1.51 to $42.50 a barrel. The gains came as US stocks jumped about 3 percent, bouncing off of 12-year lows hit Monday, after Bernanke told US lawmakers that he was committed to ensuring the economic viability of banks. Uncertainty about the future of the US banking system has raised concerns that the economic crisis could worsen, darkening an already gloomy outlook for US energy demand.
Buying in the oil markets was encouraged by figures showing stronger-than-expected Opec compliance with its production cuts. Energy consultant Petrologistics said this week that Opec producers were likely to pump less oil in February than January and a Reuters calculation based on the figures showed the cartel's compliance to its supply cut agreements was 89 percent.
"The Opec compliance was bigger than expected," said Oliver Jakob of Petromatrix. Opec members are scheduled to meet March 15 in Vienna and are expected to consider deepening their output cuts. Oil prices have dropped nearly $110 a barrel from their peak in July as the economic crisis cuts into demand. Traders were awaiting US oil inventory data on Wednesday that was expected to show a 1-million-barrel increase in crude stocks last week, a Reuters poll of analysts showed.