Oil prices turned higher late Monday afternoon to settle above $50 a barrel for the first time in more than two months.
U.S. crude futures rose 46 cents, or 0.93%, to settle at $50.17 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 13 cents, or 0.25%, to $52.65 a barrel on ICE Futures Europe.
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U.S. crude futures gained nearly 9% in July for their largest monthly percentage gain since April 2016. Rapidly declining supplies of oil in U.S. storage tanks and Saudi Arabia's commitment to limit its exports helped convince many traders and investors that the supply glut that has weighed on the market for three years is waning.
Monday's move is the latest sign of renewed confidence in the oil market.
"Everyone has been so, so bearish. Now it's the perfect recipe for a contrarian rally," said Mark Benigno, co-director of energy trading at INTL FCStone.
Oil prices have languished below $50 since late May, after the Organization of the Petroleum Exporting Countries and other major exporters disappointed many investors by not agreeing to deeper output cuts. Investors who had bet that the production cut agreement would send oil prices climbing toward $60 a barrel began to give up hope. Oil prices tumbled into bear market territory in June.
A confluence of factors helped lift prices Monday, after they initially edged lower.
The prospect of a rapid increase in U.S. production has weighed on the market this year, but the U.S. Energy Information Administration reported Monday that its monthly figures showed that U.S. oil output in May wasn't as high as preliminary weekly figures indicated. That's the second month in a row that the monthly figures have fallen short of weekly data.
And momentum-focused traders were likely pulled in as oil prices broke through key technical levels late in the day Monday. Automated systems that follow momentum have grown especially influential in the market this year. While some analysts and brokers have blamed them at times for selloffs and depressed prices, they also likely contributed to the sharp rise Monday afternoon, brokers said.
"Once it got going and took out some levels, from a price standpoint you can see the algos kicking in," said Michael Hiley, a trader at LPS Futures LLC.
Analysts and brokers said oil was also pulled higher in part by rising gasoline prices on the final day of the August gasoline futures contract. An outage at Europe's largest oil refinery Sunday also boosted fuel prices. Gasoline futures rose 2.97 cents, or 1.77% to $1.7058 a gallon. Diesel futures rose 1.22 cents, or 0.74%, to $1.6519 a gallon.
Still, some cautioned that the rally may sputter. While the continuing pullback in U.S. oil supplies and drilling activity has supported views that the shale boom is plateauing, many shale producers will likely be more profitable with oil prices above $50, and that could lead to higher output.
Sarah McFarlane, Jenny W. Hsu and Dan Molinski contributed to this article.
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(END) Dow Jones Newswires
July 31, 2017 16:52 ET (20:52 GMT)