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Crude oil futures surge, building on Monday's significant gains

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Investing.com -- WTI crude oil futures rose by nearly 3.5% on Tuesday, amid a stronger dollar and dwindling supply as prices reached a seven-week high.

On the New York Mercantile Exchange, WTI crude oil for May delivery gained $1.82 to a session-high of $53.96 a barrel in U.S. afternoon trading, before falling back slightly to $53.88 (up 3.33%). The upward movement built upon Monday's gains when crude futures shot up by more than 6%, following the preliminary accord reached in the Iranian Nuclear Deal and a disappointing U.S. jobs report on Friday. At one point on Tuesday, crude futures moved above $53.46 a barrel, its highest level since Feb. 17.

On the Intercontinental Exchange (ICE), brent crude for May delivery gained 0.94 or 1.62% to 59.06 a barrel. Brent crude futures rose steadily on Tuesday from its level of 57.08 in European morning trading. The spread between the international and U.S. domestic benchmarks fell to $5.18, below Monday's level of $6.04.

On Monday, Genscape, Inc., a global provider of energy information for financial and commodity markets, said that supply levels at the Cushing Oil Hub in Oklahoma rose by only 169,000 for the week ending April 3. By comparison, inventories at Cushing grew 2.629 million barrels for the week ending Mar. 27, one week after an increase of 1.911 million. Last month, the Energy Information Administration (EIA) reported that supply levels in the U.S. for crude storage had reached 62% of capacity.

Since last June prices for crude futures have plunged roughly 50% after moving above $100 a barrel during the summer months. Analysts believe that prices could plummet even further if U.S. crude storage reaches capacity, a development that would force producers to slow output. In March, the EIA revised its estimate for 2015 U.S. crude production to 9.3 million barrels per day, its fastest rate in 30 years.

The estimates come ahead of the American Petroleum Institute's weekly inventory data on Tuesday and the EIA's report on Wednesday concerning weekly supply levels.

A bearish outlook on short-term crude prices from Goldman Sachs (NYSE:GS), however, softened Tuesday's gains. In a note to investors, the bank indicated that it is unlikely that crude futures could reach $65 a barrel in 2016 if production levels remain constant.

"Prices need to remain low in coming months to achieve a sufficient and sustainable slowdown in U.S. production growth," Goldman said in the note.

Meanwhile, international prices also rallied as delegates from Iran met with Chinese leaders in Beijing. China, Iran's largest oil client, has purchased roughly half of Iran's oil exports since 2012. Iran currently has approximately 30 million barrels of oil in offshore reserves ready for export, according to the EIA.

Iranian oil exports are expected to surge after Western powers temporarily suspended economic and financial sanctions last week. If Iran increases oil exports substantially over the next year, the EIA said annual average growth could increase by 500,000 barrels per day in production in 2016.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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