By Timothy Puko
Oil prices rose Tuesday on the back of optimistic forecasts from the Saudi oil minister and a steep fall in the dollar.
Saudi Oil Minister Khalid al-Falih told reporters in the United Arab Emirates that the market would rebalance by the end of the first half, according to media reports. The dollar also fell to a one-month low, the type of move that makes dollar-traded oil less expensive for foreign buyers and often causes prices to rise.
"All the above," said Donald Morton, a trader at Herbert J. Sims & Co., about why oil was moving higher. "It doesn't have an excuse to go lower."Light, sweet crude for February delivery settled up 11 cents, or 0.2%, at $52.48 a barrel on the New York Mercantile Exchange. Brent crude, the global benchmark, lost 39 cents, or 0.7%, to $55.47 a barrel on ICE Futures Europe.
Crude prices strengthened overnight after Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, touted the effect of its production cut pact with major non-OPEC producers. Declining oil revenue for the government has forced Saudi leaders to become very supportive of oil production cuts, and public comments like those from Mr. al-Falih re-emphasize their urgency, said Peter Cardillo, chief market economist at First Standard Financial in New York.
"Producing nations want to avoid a slump in prices," he said. "What they command, they can still achieve."
Oil prices in the $50 range are best for Saudi Arabia to fulfill its domestic priorities, said Helima Croft, head of commodities strategy at RBC Capital Markets, in a note. Saudi Arabia and several other OPEC members are suggesting they will go beyond baseline requirements to ensure the deal works, she noted.
"The core OPEC members will work hard to hold the deal together until at least June, even if some members push the boundaries of compliance," Ms. Croft wrote.
Oil also got a boost from the dollar, which President-elect Donald Trump said in an interview with The Wall Street Journal was "too strong" in part because China holds down its currency. The WSJ Dollar Index, which measures the U.S. currency against 16 others, was recently down 1.3%, trading at its lowest level in a month.
Prices have been stuck at levels just above $50 since the start of December, boosted there by the OPEC deal. Though they neared the bottom of the range in the past week or so, they are unlikely to break below it, in part because of OPEC but also from "aggressive Chinese buying," analysts at Citigroup Inc. said Tuesday.
Refineries are running hard and heating demand is high because of cold weather in Asia, Citi said. Recent government-backed research forecast China's net crude imports would rise by 400,000 barrels a day this year, but new refinery capacity, growing strategic government reserves and declining domestic production could make that an underestimate, the bank said.
Gasoline futures lost 0.7% to $1.6004 a gallon, snapping a three-session winning streak. Diesel futures fell 0.2% to $1.6486 a gallon, its fourth loss in six sessions.
Chris Dieterich and Jenny W. Hsu contributed to this article.
Write to Timothy Puko at email@example.com
(END) Dow Jones Newswires
January 17, 2017 15:35 ET (20:35 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.